The auto industry suffered a steep decline at the onset of recession in 2008.  Autos and light truck sales fell from 17 million to 10 million.  But the latest sales data of 14.5 million annualized vehicle sales in August is encouraging.  The strong recovery in sales has also help boost prices of new vehicles, which is good news for car makers though not good for consumers.

Given that autos are typically the second-most expensive purchase item after a home purchase for most consumers, it is worth tracking whether consumers are becoming confident enough to buy a high-priced product that often requires financing.  A fairly robust recovery in auto sales may therefore portend a solid home sales recovery.  So far, auto sales are up by more than 30 percent from the low point in 2009, while home sales are up only by 10 percent.  Auto prices up by 10 percent from the cyclical low point while home prices are up by mid-single digits.  Though housing is trailing autos in the strength of recovery this could also mean that housing have a much more room for further sustained expansion.      

On additional point to note related to auto sales is jobs and home prices.  Some states have done reasonably well in the past decade, such as North Dakota and Texas.  But Michigan was bleeding badly due in part to the collapse in auto sales.  Now, thanks to auto sales rebound, jobs have been added in Michigan for three straight years.  The improving job trend will lead to solid housing demand in the Wolverine State.  That in turn will start get home prices to move higher.