Housing market fallout crashes into AutoNation
Fallout from the weak housing market is spreading. It has already slammed homebuilders and their suppliers and was dragging down AutoNation Friday.
Shares of AutoNation fell 70 cents, or 3.5%, to $19.34 after Bear Stearns analyst Michael Geoghegan downgraded the company to “peer perform” from “outperform.” Geoghegan pointed to AutoNation’s heavy exposure to regions with slumping housing markets.
AutoNation operates more than 300 new vehicle franchises throughout the United States. More than half of its revenue comes from its stores in California and Florida.
Housing markets in both states have been particularly dogged by the recent downturn. Buyers there took advantage of lax lending standards to acquire homes they couldn’t afford. Their extravagance caught up with them when they couldn’t pay their mortgages. In response, lenders tightened credit requirements and helped dampen home demand at a time when supplies were high.
Geoghegan said the housing problems are now spilling over to other sectors. They are rattling consumer confidence, as reflected in AutoNation’s latest quarterly performance, which missed expectations.