As the slowdown in the housing market, combined with the ongoing credit crunch, continues to squeeze the economy, individuals who work in industries affiliated with housing are being forced to make adjustments to keep their businesses afloat.
Meanwhile, the trickle-down effect from the housing slowdown is affecting seemingly unrelated industry sectors such as automobile sales, which are feeling the pinch as consumers keep a tighter grip on their wallets.
Here’s how some of those businesses are dealing with the changes.
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New-car purchases – often one of the first things to go when consumers are concerned about sagging home prices and difficulty accessing credit – are falling as people rein in spending to wait out the current economic woes.
“We saw some of the lowest sales historically for any given June or July,” said Jesse Toprak, executive director of industry analysis for . “We are seeing a major impact on the number of cars sold.”
Nationally, August auto sales were down 1.42 million vehicles, or 4.5 percent, compared with August 2006. Sales were up 8.7 percent from July, according to ., an automotive consumer website.
Heavy incentives pushed the increase from July, but, over the long term, the housing market is expected to contribute heavily to soft auto sales numbers, analysts said.
“It’s not that people cannot afford it,” Toprak said. “When there is a lot of uncertainty with the largest thing you own – your home – consumers tend to postpone purchases or buy a cheaper vehicle.”
As a result, small-car sales are still doing well. Luxury auto brands have not seen a decline in sales either, experts said.
The car-sales slowdown likely will continue until 2008, said David Healy, auto-industry analyst for Burnham Securities Inc.
“The record recently is kind of depressing,” said Healy. “Credit has tightened up, and it’s harder for the marginal buyer to finance a new car.”
Some local dealers are bracing for a decline, but sales have been constant for many, said Ivette Dominguez, president of Alpine Buick Pontiac GMC in south Denver.
“We are holding steady. We haven’t increased, and we haven’t declined yet,” she said. “But we are bringing in the range a little bit, being a bit more cautious in advertising and really watching the mortgage industry because it affects consumer behavior.”
Dominguez credits crossover vehicles with helping keep her sales up. The Buick Enclave and GMC Acadia both run from $29,900 to $40,000 and have been flying out the door, she said.
Todd Hilleboe, general manager at Go Courtesy Ford, also credits crossover vehicles, Ford Edge and Freestyle, for keeping new-vehicle sales steady. His used-car sales are up 10 percent.
“I’m not seeing a lot of people pulling themselves out of the market here like in California and Florida,” he said.
The Front Range, Hilleboe said, may already have seen the worst of the housing crunch because of the high foreclosure rates in the past few years.
Small-car sales and used vehicles are doing well because they’re the easy answer for consumers worried about unemployment, mortgages or changes in financing, experts said.
“This category becomes the natural go-to category,” Toprak said. “The cheap cost of ownership and the fact that they can get better gas mileage makes them better options when consumers are not so sure.”
Higher-end luxury brands are not feeling the pinch at all, analysts and dealers said. Consumers who buy these brands may not have the same worries as middle-class or lower-income families about the housing market.
Terry Minnick, at Mercedes Benz of Littleton, has seen zero effect on his business, which is up 2 percent from last year. He can’t keep the sport utility vehicles, which run upwards of $60,000, in his showroom.
“We’re selling the higher-end vehicles at a higher rate than we were last year,” said Minnick, planning a $2 million expansion. “Our consumer confidence is very healthy from our perspective.”
Staff writer Elizabeth Aguilera can be reached at 303-954-1372 or eaguilera@denverpost.com.
