Wednesday, June 08, 2011

Existing-Home Prices Might Be Falling, But Used Vehicle Prices Are Soaring to Record Highs

Existing-home prices may be falling, but used car prices reached an all-time high in May, according to a new report from Manheim Consulting (see chart above).  Manheim's Used Vehicle Value Index of 127.8 in May was 5.6% above its year-ago level of 121.  In eight out of the last nine months since last September, the Used Vehicle Index set new a new monthly record.

In this WSJ video,"Time to Trade In That Used Car?" four reasons are given for record-high used vehicle prices:

1. Earthquake-related reductions in Japanese production, leading to shortages of some popular new cars like the Toyota Prius. 

2. The recession-related collapse in new car sales in 2008-2009 is now contributing to a below-average number of trade-ins and an overall shortage of used cars on dealers' lots.  

3. Because of the weak economic recovery and labor market sluggishness, demand for new vehicles is soft, and demand for used cars has increased as cost-conscious consumers remain cautious when making major purchases, and look for ways to save money when buying cars.

4. Higher gas prices are also making car buyers more cost-conscious, which has increased demand for used cars, especially 4-cylinder vehicles.

5. Update: The destruction of almost 700,000 used cars in the summer of 2009 during the "Cash for Clunkers" program could also be contributing to the current shortage and high prices for used vehicles.  (HT: LoneSnark)


At 6/08/2011 9:54 AM, Blogger LoneSnark said...

Did we not also crush a bunch of them during cash-for-clunkers?

At 6/08/2011 12:43 PM, Blogger Free2Choose said...

Yup. Maybe we need to demolish an assload of good, functional homes (not just the tear-downs in blighted areas of Detroit) to prop up home prices. That would work to "restore" housing prices. (Please note that this is submitted with tongue firmly planted in cheek, lest I get subsequently blasted in later posts).

At 6/08/2011 12:47 PM, Blogger morganovich said...

how about offering a greencard to an immigrant that can pay cash for a house?

At 6/08/2011 2:09 PM, Blogger juditramos.pen said...

This comment has been removed by a blog administrator.

At 6/08/2011 6:46 PM, Blogger Craig Howard said...

Maybe we need to demolish an assload of good, functional homes

Yeah. I bet Obama, in his wildest fantasies, never supposed that his economic legacy would read that his policies "restored the used car market".


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