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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. New constructions and home sales rebounded.
  2. The Fed left its current policy in place, but suggested cuts are coming.
  3. Jobless claims remained muted.

New construction rebounded in February following weather disruptions in January. Existing home sales also jumped in February but remain down from a year ago. Existing home supply remains very tight but is up slightly from last year.

Jobless claims remain limited and reflect no significant stress on the labor market.

The Federal Reserve left interest rates and overall monetary policy unchanged after last week’s March meeting. The Fed’s updated economic projections and Chair Jerome Powell’s press conference were broadly interpreted as dovish. They are looking past the recent uptick in inflation metrics while upgrading forecasts for the economy and sticking to expectations to cut the Fed funds rate by three-quarters of a point by the end of the year.

Bond yields and most interest rates moved lower this week but remained up for the year.

New Construction Starts Rebounded More Than Expected

Residential construction activity recovered in February and was stronger than expected.

The seasonally adjusted annualized rate of starts increased by 10.7% when 8.2% growth was expected, and January’s decline was revised to a smaller decline.

Permits increased by 1.9% when a 0.5% increase had been expected, and the prior decline was revised to a smaller decline. The increase in starts was in both single-family and multifamily.

After the February increase, total starts were up 5.9% from a year ago. Single-family starts were up 35% year to year. Multifamily starts were down 35%. Permits were up 2.4% from a year ago in total but were up 29.5% in single-family, while multifamily permits were down 29%.

The monthly permit trend saw more growth in multifamily, as single-family increased by 1.0% and multifamily increased by 4.1%. Permits lead starts, so the permitting pace at 1.518 million units was slightly behind the 1.521 million starts pace, which indicates that starts may not increase as strongly in future months. Multifamily homes have more potential for starts in the months ahead as the permit pace was 487,000 compared to 392,000 for starts, while single-family had more starts than permits.

Existing Home Sales Jumped on Tight Inventory

Existing home sales increased strongly in February, as the existing home sales SAAR increased 9.5% to 4.38 million from 4 million in January. At the February rate, existing home sales were down 3.3% from a year ago.

Sales were up for the month in all regions except the Northeast, where sales were flat. The West region saw the strongest monthly sales increase at 16.4%, but all regions had sales down from a year ago.

Inventory increased 5.9% to 1.07 million units, which was up 10.3% year over year. Inventory is moving relatively quickly, as the typical time on the market was 38 days, which was up from 36 days in January and 34 days in February last year. The months’ supply of homes for sale declined to 2.9, less than half of what is considered normal but up from 2.6 months last year.

The median sales price increased to $384,500, up 5.7% from last year.

Jobless Claims Declined

Seasonally adjusted initial jobless claims declined by 2,000 to 210,000 for the week ending March 16. That was 900 less than we saw in 2020 before the pandemic began. Non-seasonally adjusted initial claims declined by 12,700 and were 55,000 lower than before the pandemic.

Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, increased by 4,000 from the previous week, moving the total up to 1.81 million as of March 9. The level of continuing claims was 47,000 more than it was before the pandemic.

The broadest measure of continuing claims declined by 37,000 to 2.11 million in the latest data, which lags the traditional number and is not seasonally adjusted. That total measure is down 64,000 over the last four weeks but is 4,200 higher than the pre-pandemic level.

The labor market is not as strong as it was a year ago, and new claims are sticking longer, but stress remains limited.

The Fed Left Its Current Policy in Place, but Cuts Are Coming

After its March meeting last week, the Fed left interest rates and overall monetary policy unchanged. The Fed is effectively on cruise control, leaving rate policy restrictive and continuing to sell off assets on the balance sheet until “…inflation is moving sustainably toward 2%.”

However, the Fed’s updated economic projections and Chair Jerome Powell’s press conference were broadly interpreted as dovish in that they are looking past the recent uptick in inflation measures while upgrading forecasts for the economy and sticking to expectations to cut the Fed funds rate by three-quarters of a point by the end of the year.

Bond Yields and Rates Move Up

Bond yields and rates for consumers have moved higher in 2024 but have drifted lower last week.

The 10-year U.S. Treasury has moved 5 basic points (BPs) lower in March to 4.20% but is up 32 BPs in 2024. The 10-year peaked at 5.02% in late October.

The average mortgage rate has declined 19 BPs in March to 6.91%, up 46 BPs from a year ago. The average mortgage rate peaked at 8.03% in mid-October.

The average new auto loan interest rate has increased 2 BPs to 9.74% in March leaving it up 82 BPs from last year. The average new rate peaked at 9.95% in mid-October. The average used auto loan rate has declined 25 BPs to 14.34% in March from a 24-year peak of 14.59% in February and is now up 32 BPs year to year.

Jonathan Smoke
Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.

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