This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Will a Housing Slowdown Hurt Autos?

Although indicators have been mixed, one is especially important: mortgage applications. That data point alone is like a consumer "buy-or-sell" barometer. When mortgage rates spike higher or swoon lower, it's the mortgage applications number that tells us where the demand is.

When rates go higher, demand would normally drop. At times, the drop may mean very little. But when mortgage rates rip higher like they have now, by over 100 basis points, the market has spoken. Rates are too high, and few potential homeowners are chasing the ship, so to say, before rates go higher yet again, like many "experts" had previously thought.

So how does this affect automakers? Well, the boost in auto sales lagged the housing market, before really playing catch up in the spring of this year. I'd expect for it to be the same coming down -- assuming the housing market fails to regain its upward momentum.

Maybe investors will be ahead of the ball, sell too early, wonder why companies like Ford (F) and General Motors (GM) haven't gone down yet, and end up buying back their soon-to-go-down-again shares.

Perhaps, investors won't even tie the two sectors together and get completely blindsided by a huge sales miss or earnings whiff. After all, it will likely take a few quarters for the effects to be felt. I'm not bearish by any means, especially on autos. In fact, I just wrote about why I like Ford and am long.

But housing is the backbone of the economic recovery. Its spillover effect is enormous. It's not just a few corporations that do good and pay well. It's millions of sales people, construction workers, tradesmen, mortgage brokers and so on, who feel the wealth effect.

Without them, there's no consumer confidence. There's no household spending. And there aren't as many new F-150s to go around for all of the contractors who suddenly lost the work they have grown accustomed to over the past six to 12 months.

At the time of publication, the author was long shares of Ford.

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.03 -0.71%
FB $105.41 -0.31%
GOOG $748.15 -0.02%
TSLA $229.64 5.22%
YHOO $33.16 0.61%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs