Houses and Cars

One rule of thumb for economic forecasting is that cars and houses follow similar patterns. Auto sales — actually sales of cars and light trucks since for many people the car is really a pickup — and single family housing starts follow one-another closely. Both are big ticket purchases for consumers, both purchases are affected by interest rates and loan qualifications and both can be driven up or down by consumer sentiment and confidence.  Some forecasters use car sales, which are announced in the first few business days of the month to predict housing starts which are released a couple of weeks later.  The chart compares the two monthly series over the last 36 years.  Both series are measured in millions of units (cars or single family homes started) and are shown as seasonally adjusted annual rates.  The first thing one notices is that the two series ups and downs do track each other fairly well. Housing takes more of a hit in downturns that cares, especially in 1979-1982 and the Great Recession/housing bust of 2007-2009.  The last few years reveal that for all the excitment over the housing recovery, it is lagging cars.

auto sales and housing starts

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