Auto Sales and Housing Market Update
Auto sales declined to an annual rate of 10.78 million units in January after an 11.25 million sales pace in December. The 20% gain in third quarter auto sales was due to the "cash for clunkers" program. Sales of autos increased in the each of the three months of the fourth quarter but the quarterly tally fell short of the sharp third quarter jump. The January auto sales number sets up a weak trajectory for the quarter as the level of auto sales is slightly below the fourth quarter (10.87 million units) average. The January auto sales reading is a negative for consumer spending. 
In other related economic news, the Pending Home Sales Index (PHSI) of the National Association of Realtors moved up 1.0% to 96.6 in December following a 16.4% plunge in November. The November plunge is related to the original expiry date of the first-time home buyer tax credit program which has now been extended to April 2010. The PHSI has a positive relationship with existing home sales when advanced by two months. Sales of existing homes declined 16.7% in December. The latest PHSI and the extension of the first-home buyer tax credit program suggest the sales of homes could possibly have risen in January. The January sales report for existing home sales is scheduled to be published on February 26.
The homeowner vacancy rate of the U.S. economy was up one notch to 2.7% in the fourth quarter of 2009 but down from a year ago reading of 2.9%. From chart 3, it appears that homeowner vacancy rates are still significantly above the historical norm (about 1.6%, see chart 3). Rental vacancy rates dropped to 10.7% in the fourth quarter from 11.1% in the prior 3-month period (see chart 4). The levels of both vacancy rates bode poorly for home prices.
