Yippee, we are selling cars and trucks at a 17.7 million pace. You know how good that is? It's up eight million units from the depths of the Great Recession.
But you know how weak that is? It's only back to where we were in 2005, before the great recession. In fact, it's identical to the peak.
Yet, we had 296 million people in our country back then. We now have almost 320 million, up more than 24 million.
When you look at it like that, is there really a ton of growth? Is it really that shocking?
It is certainly good news that, at least with autos, we are back to where we were before the tsunami hit. At about one million housing starts, we are still an astounding 700,000 units below where we were back then.
We have so radically underinvested in the housing industry, that you have to wonder if there will ever be a comeback to those levels, but with any pick-up in household formation the way Home Depot's (HD) Carole Tome is starting to see, there's hope.
You want some sobering perspective on housing starts? We are hoping upon hope that the last few months might be a harbinger for a possible 1.2 million housing start figure. That would bring us back to where we were as a country in 1961. The difference? We were a nation of 180 million people back then. We have added 160 million people since.
Still, it doesn't matter. What's the first thing we heard when we got the 17.7 million figure? That there's a bubble in auto sales, fueled by cheap money. I googled bubble in auto sales on cheap money and found a horde of stories back dating back to 2012, the first year auto sales had a meaningful advance from the 2008-2009 trough.
So it is not a new alarm.
What was far more interesting to me was a decision made by Wells Fargo (WFC), the second-biggest auto lender in the U.S., to put a lid on subprime lending at 10% of all auto loans back in March. Now it is true that the number one lender, Ally (ALLY), is expanding in the category, going from 9% of all loans to 12 to 15%. I will grant you, that's excessive. Maybe Ally's back to its old bad ways.
But that's not been the case at either AutoNation (AN) or Carmax (KMX), at least according to their sobering and smart executives on their conference calls.
The ironic thing? People don't walk away from their cars as the pundits think they do. As Michael Jackson, the very able CEO of AutoNation recently told us, of the $3.5 trillion in auto loans made in the last decade, only $800 to $900 billion have outstanding balances. These loans get paid off. There's a simple reason: you can default on your home loan and still keep your job, but you can't default on your car loan and get to your job.
So bemoan the bubble in auto loans, but marvel, at least for a moment, that the second-largest lender cut back pretty drastically and yet auto sales continued to surge.
Worry about threatening subprime loan growth, but remember how few defaults there really are. And focus on two pieces of data: we have far more people in this country without far more cars and trucks sold from 10 years ago and the average vehicle on the road is now 12 years old -- thank you, AutoZone (AZO), for that data.
The bottom line? When you add new home starts to auto sales, you get a picture of being "under-homed" and "under-autoed" from a decade ago.
Stop sweating fears of a boom and start wondering why we aren't even doing better in these two key fronts. The answer? We are just now starting to recover from the trauma of the Great Recession.