Why auto sales are surging while homes are not
It all comes down to the availability of credit, borrower ratings and the average age of American vehicles.
Part of the increase in auto sales this year has resulted from pent-up demand as Americans held on to their cars longer during the economic downturn. The age of the average American vehicle rose to 10.8 years during 2011.
Most of them are already consuming alcohol – give them a few more years and they’ll want to vote, too.
The simple fact is it’s much easier to get a loan or a lease for a vehicle, than it is to close a mortgage on a home or condominium. Only those with the best credit can buy a house these days, as the home loan lenders remain twice shy – a result of providing adjustable rate mortgages to virtually anyone with a pulse regardless of their means. That’s what created the bubble that burst four years ago.
Small businesses still have a hard time obtaining loans. Credit card access remains restricted despite the ads on the television and the come-ons in the mailbox.
Meanwhile, sales of existing homes are up 5 percent to 4.61 million annually, but prices remain depressed due to a glut on unsold properties on the market, according to the National Association of Realtors. This is partly because or stringent lending practices, but they may be well justified as one of every three pending contracts is canceled.
Housing starts are also showing mild recovery with five months of slight improvement projected to surpass 700,000 units, a three and a half year high. In fact, according to the Dept. of Commerce, new housing starts may contribute to economic growth this year for the first time since 2005.