NADA Economist Sees '09 Car Sales Upturn. Huh?

At the risk of slipping in a “I told you so,” TTAC flagged the current automotive meltdown back in summer ’06, when new housing starts cratered. A bit late, but there you go. At the time, TTAC pointed out that the housing slowdown would kill pickup truck sales– at the precise moment GM CEO Rick Wagoner and his media groupies were saying the then-new Silverado was GM’s salvation ( Edmunds: “If these hit, GM might have a full turnaround on its hands.”) Obviously, we didn’t see the collapse of the entire housing market and then, by extension, the new car market. But we sure as Hell made the connection between too-easy credit (for both homes and cars) and an eventual, inescapable reckoning. I mention all this because it’s obvious enough that new car sales won’t recover until the U.S. housing market recovers. And not just to us. Speaking at the dealer wake in N’orlins, the National Automobile Dealers Association’s chief economist Paul Taylor preached econ 101 to the bruised and battered faithful.

“Taylor said auto sales are tied to the fall in real estate values,” The Detroit News dutifully reports, “and in order for vehicle sales to recover in 22 states, housing values must stabilize. The states generally are along both coasts, in the Northeast and around the Great Lakes.

“States with the highest residential real estate value declines are Nevada, California, Florida and Arizona, and all of them have among the highest percentage drops in new-car registrations, Taylor said.”

From this realistic perspective, Taylor jumps off into the deep end, telling his adherents what they want to hear.

“[Taylor predicts] sales in the first half of the year will remain slow, but slight economic improvement starting in the third quarter should push sales to at least 12.7 million vehicles for the year.

“That’s still 3.8 percent shy of last year’s 13.2 million in sales, but better than the 10.3 million annual selling rate in December. Other analysts and automakers have predicted sales as low as 10.5 million for the entire year in 2009.”

Housing recovery leading to car sales recovery in 2009, eh? Consider this, from Bloomberg:

“The [housing] rebound last month was led by a distressed-property related jump in the West, including California, Nevada and Arizona, the NAR [National Association of Realtors] said. Sales of distressed properties accounted for about 45 percent of all sales last month…

“Property values are down by about 23 percent, according to the S&P/Case-Shiller index covering 20 metropolitan areas…

“U.S. foreclosure filings jumped 81 percent last year as more than 2.3 million properties got a default or auction notice, or were seized by lenders, according to RealtyTrac Inc., an Irvine, California-based seller of default data.

“KB Home, the fourth-largest U.S. homebuilder, on Jan. 9 reported a fourth-quarter loss exceeding analysts’ estimates and predicted more pain for the housing market this year.

“’The housing industry continues to confront unprecedented downward pressure,’ Chief Executive Officer Jeffrey Mezger said in a conference call. ‘These conditions persist nationally, with no visible signs of lessening in the near term.'”