Smoke on Cars
Auto Market Weekly Summary
Monday June 24, 2024
Article Highlights
- The retail sector saw weak consumer spending, with May's growth of 0.3%, less robust than expected, and a downward revision of April’s growth to a decline of 0.2%.
- Residential construction trends were negative for May, with a 5.5% decrease in the seasonally adjusted annualized rate of starts.
- Existing home sales saw a decline of 0.5% in May, marking the third consecutive month of declines.
Highlights
- The retail sector saw weak consumer spending, with May’s growth of 0.3%, less robust than expected, and a downward revision of April’s growth to a decline of 0.2%.
- Residential construction trends were negative for May, with a 5.5% decrease in the seasonally adjusted annualized rate of starts.
- Existing home sales saw a decline of 0.5% in May, marking the third consecutive month of declines.
Retail Sales
The initial report for May indicated weaker-than-expected consumer spending, with motor vehicles and parts categories outperforming the rest.
- Sector performance was mixed, with five of twelve major categories seeing sales decline.
- The auto sector saw an increase in sales at 0.8%, following a 0.4% decline in April.
- Categories with notable gains were sporting goods, hobby, book, and music stores at 2.8%, and clothing and clothing accessories stores at 0.9%.
- Categories experiencing the largest monthly declines were gas stations at -2.2% and building material and garden equipment and supplies dealers at -0.8%.
- Retail sales were up 2.3% year over year, a decrease from the 2.7% increase in April.
Residential Construction
Residential construction trends for May were weaker than expected with a decline in the seasonally adjusted annualized rate of starts of 5.5%.
- Permits declined 3.8% versus an expected 0.7% increase.
- There were declines in both single-family starts at -5.2% and in multifamily starts at -6.6%.
- Year over year, total starts were down 19.3%, while single-family starts were down 1.7%, and multifamily starts were down 50%.
- In total, permits were down 9.5% year over year. Single-family permits were up 3.4% year over year, while multifamily permits were down 29%.
- Permits have declined in total for three straight months, and single-family permits have declined for four straight months as higher mortgage rates this year have pushed off expectations for a housing recovery.
Existing Home Sales
Existing home sales saw a decline of 0.5% in May, which was slightly better than expected.
- This decline represents the third consecutive month of declines.
- Year over year, existing home sales were down 2.8%.
- Sales were down for the month in the South region but unchanged in all other regions.
- Inventory increased 6.7% to 1.28 million units, which was up 18.5% year over year.
- Median sales price increased to $419,300, which was up 5.8% year over year.
It’s worth noting that the weakness in new construction and existing home sales is primarily due to mortgage rates, which averaged 7.35% in May. This has been over 7% for 12 consecutive months and is considerably higher than the abnormally low rate of 3.09% in 2021.
However, other factors are not equal, as home prices are up substantially, property taxes follow home prices, and property insurance has been increasing much faster than home prices over the last year. As a result, it is tough for an existing homeowner to find a different home that makes economic sense to trade, which keeps existing home inventory low. The new home market has fared better, but affordability limits what’s possible, and now consumers expect rates to be lower soon.
Jonathan Smoke
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.