Here in my (compact) car

Daily Data: If you spend more on loan, you spend less on car

I hope everyone had a Happy Easter.

In today’s dispatch:

• a new category leader in cars

• an analogy to housing that keeps making sense

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Here in my (compact) car

Random Walk has long maintained that home prices are not actually going up.

If people have generally stopped selling their homes, it’s because sellers can’t get the price they want. That makes sense, because when interest rates are high, purchasing power goes down, and so it would be pretty miraculous if buyers could afford ZIRP-era prices of homes, without ZIRP.

And just because a relatively small share of existing homes are sold (for what appear to be increasingly higher prices), doesn’t mean everyone’s home value went up—if it did, they would be selling their homes, as per usual (but they’re not).

If you want to get a sense of how home prices are actually trending, look at home builders who are, y’know, in the real-live business of selling homes. Builders need to move inventory, and they will price accordingly.

As it happens, builders have been selling smaller, cheaper homes, because that’s what people can actually afford in a higher rate world.

Random Walk has previously analogized houses to cars, in a futile attempt to make the obvious point that people refuse to acknowledge. If the dealership is only selling compact cars because the luxury models don’t sell anymore, then it would be pretty silly to conclude that the value of luxury cars is going up.¹

But that’s pretty much how people have approached home prices.

Compact cars lead the way

Anyways, Cox Automotive did its little quarterly auto sales roundup, and you wouldn’t believe what they found.