Smoke on Cars
Auto Market Weekly Summary
Monday March 28, 2022
- Jobless claims fall to a 50-year low.
- Consumer sentiment falls on higher gas prices.
- Housing market momentum slows on surging mortgage rates.
Last week was a light week for new economic data. This week delivers a veritable buffet of updated data covering personal income, spending, and inflation data for February, and employment, consumer confidence, and new-vehicle sales data for March.
The housing market saw declining momentum in February, as surging mortgage rates are having an impact on affordability that compounds price increases.
Jobless claims have declined to levels last seen 50 years ago when population and job numbers were much smaller.
Sentiment declined again in March as the spike in gas prices weighed on consumer views. Gas prices peaked mid-month. We then saw some improvement in the most up-to-date measure of sentiment over the last 10 days as gas prices have eased a bit.
Tax refund season has started slowly this year. Through March 18, only 40% of projected refunds for the year have been issued, when in 2019, 65% had been disbursed by now. However, the average refund is up 13% to the highest ever recorded at this stage of tax refund season.
Home sales lose momentum: New home sales, which are based on new contracts signed on newly constructed homes, declined 2.0% in February when an increase of 1.1% had been expected. The decline also followed a downwardly revised 8% decrease in January.
New home inventory increased 2.3% from January and was up 33% from a year ago. With the slower pace of sales, new-home supply increased to 6.3 months, which is considered a normal level of supply. In February, 27% of the new homes sold were on homes not yet started, while 47% were under construction, and 26% were completed, finished units.
With the declines in January and February, new home sales were down 6.2% from a year ago but were up 14.4% compared to 2019. Existing home sales also declined in February. Total home sales were down 6.7% as a result and are down 2.9% from a year ago but up 13.5% compared to 2019. Pending home sales, which are new contracts signed on existing homes, declined 4.1% in February from January, leaving pending sales down 5.4% year-to-year.
Average mortgage rates, which have moved up by 1.68 percentage points since the end of last year, are taking a toll on housing demand as affordability falls and credit tightens. The movement in rates alone produces a 10% increase in monthly payment.
Jobless claims fall: As of March 12, 1.35 million people were on traditional unemployment benefits. Continuing claims declined by 67,000 in the last week and are down 124,000 over the last 4 weeks to what is now not only a new low for the pandemic but also the lowest level since 1970. New initial claims also declined in the most recent data. New initial claims for the week ending March 19 declined 28,000 to 187,000, which was the lowest level of initial claims since 1969.
Consumer sentiment down: The sentiment index from the University of Michigan declined 5.4% in March as current conditions and expectations both declined with inflation accelerating. The full month reading was down slightly from mid-month and was the lowest full month reading since August 2011.
The Morning Consult index daily index has also declined in March, but it has seen improvement over the last 10 days as the price of gasoline peaked on March 13 and has come down slightly since. Even with the improvement over the last 10 days, the daily Index from Morning Consult is still down 1.2% so far for the month. The daily index reached its lowest level for the pandemic on March 14, which was just after the peak in average gas prices.
Join Us: The Q1 2022 Cox Automotive Industry Insights and Sales Forecast Webcast will be held on Monday, March 28, 1 p.m. EDT. RSVP to attend. A replay will be available the following day.
The next Auto Market Report video will be published on Smoke on Cars on Tuesday, March 29.
Jonathan Smoke is the chief economist at Cox Automotive.