Housing market downturn hurts Detroit
The stock market downturn that has lopped more than 700 points off the Dow Jones industrial average in recent days may not be the only side effect of the nation’s stumbling housing market. The automotive industry appears to be suffering from the contagion, too.
Automakers report July sales figures Thursday and industry analysts are forecasting weak numbers. That’s in part because of the soft housing market, which along with high gasoline prices is weighing on consumer spending.
“This housing market is putting consumers in a very sour mood,” said Mike Jackson, chief executive of AutoNation, the nation’s largest automotive retailer. “They’re not able to use the rising value of their homes like an ATM anymore because there’s a question mark over the market value of their homes, and in many cases they are struggling with higher monthly payments due to the higher cost of adjustable mortgages.”
AutoNation sent a chill through the market last week when it reported that its second-quarter profit and sales fell because of the downturn in housing markets in Florida and California, which account for half of AutoNation’s new-car sales and 20 percent of the U.S. total.
AutoNation has seen sales decline 14 percent in the two states as consumers pull back, Jackson said.
“All segments have been impacted to some degree, from luxury cars straight through to minivans,” he said. Even Asian automakers that have been outperforming their U.S. counterparts are seeing weakness “across the board,” he said.