Daily Forecast Update: New Vehicle Sales

November 03, 2009

By Gregg Stratton, Research Economist

Daily Forecast Update

• NAR's monthly official forecast as of October 1st
• GDP 2009 Q4:  +2.2%
• GDP 2010 Q1:  +3.1%
• GDP 2010 Q2:  +2.8%
• Unemployment rate by the end of 2009: 9.8%
• Average 30-year fixed mortgage rate by mid-2010 2009: 5.6%  

What does today's data mean for REALTORS and consumers?

• Bad News: new domestic vehicle sales decreased by 20% in October from the same period last year, largely due to a huge decline in sales at Chrysler. The October decline is only two months removed from the recent increase in sales due to the "Cash for clunkers" program.
• The decline in vehicle sales in September and October highlight the difference in efficacy of the "cash for clunkers" program and the "first time home buyer tax credit" (FTHBTC). 
• The FTHBTC's largest benefit to the housing market is its ability to stabilize prices -- which it has already begun to do. The median price for all homes rose in the third quarter of this year for the first time in 10 quarters.In effect, the FTHBTC is helping to change buyer psychology from waiting for a price bottom, to not wanting to miss current home bargains. 
• Home values are up in the third quarter, but still down from one year ago. Therefore, the extension and expansion in the tax credit through the middle of next year, as is being considered by Congress now, will help assure that the housing value momentum is sustained and that it does not lead to a similar fate of demand collapse of auto sales.
• In contrast, vehicle sales are more of a discretionary purchase, and not an investment whose value may increase over time. Tight budgets are the main reason why buyers are foregoing vehicle purchases, rather than anticipation of further price declines. 
• Thus, government auto rebates can only stimulate temporary demand. Unlike the tax credit's expected effect on the housing market, the rebates have not helped create a sustainable demand in the automobile sector.

New Vehicle Sales:

• Sales for GM were up 3.3% from last October, whereas sales for Ford increased by 4.7%.
• Sales for Chrysler were down 30% from last October.
• Overall, sales decreased by 21% for the three American companies due to the huge drop in sales at Chrysler.
• Sales were down in both light trucks and passenger cars.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

Comments? Questions? E-mail NAR Research.

NAR members, learn how you can add this commentary to your Web site, blog, or newsletter. Read more >