Is the downturn in the housing market hurting automotive sales? Yes, according to a new report from CSM Worldwide, a Northville, Mich., automotive forecasting firm. According to a release issued yesterday, "CSM analysts reaffirmed their prediction that consumer budgets stretched to the breaking point as a result of the mortgage crunch will drag sales down to 16.2 million units this year - 350,000 fewer vehicles than in 2006. It would be the lowest sales level since 1998." According to the report, car sales historically correlate closely to housing starts, which were down 26 percent for the first six months of 2007. Then the news got even worse: housing starts were down another 6 percent in July to the lowest level in more than 10 years.
"We looked at data going back to 1970, and it's remarkable how closely light vehicle sales mirror housing sales, particularly new housing starts," said CSM Senior Economist Charles Chesbrough. "With many consumers having a harder time getting mortgages or coping with higher payments from their adjustable rate mortgages, there will be a considerable impact on light vehicle sales. Weak sales of existing homes and declining home values also are dampening consumer spending, leaving less money available for vehicle purchases."When will the market improve? Not until the end of 2008, they say. "Market fundamentals have deteriorated and will need at least a year to rebuild," according to the release. Now we see why the Federal Reserve suddenly decided to try to bring down interest rates. Too bad they didn't see this coming six months ago.