High Gas Prices, Lousy Housing Market Could Hurt Auto Sales

Washington DC May 31, 2007; The AIADA newsletter reported that high gas prices and the slow housing market are expected to result in soft May auto sales, consumer website Edmunds.com reported.

Edmunds expects sales will be down 4.2 percent compared with last year, with blame for the decline resting squarely on energy costs and housing woes. Still, sales are expected to be better than in April, when automakers posted an overall 7.6 percent decline compared with April 2006.

Edmunds predicts that even Toyota, which has tended to shake off slumping sales when gas prices soar thanks to its fuel efficient models, will see a drop in sales. Economist Dana Johnson told USA Today that fuel prices and home sales hurt consumers on two levels. They are struggling to deal with an increase in an essential budget item.

And, at the same time, the housing decline makes it harder to tap their homes for credit to buy a new car. "People have a budget for driving costs. One way you can react to high prices is to either buy smaller cars or delay purchases for a while," he says.