The auto and single family housing recoveries will run parallel from mid-2009 at least through 2011. Suppliers in both markets cut surplus inventories sharply by keeping production below sales for about a year and now are beginning to ramp up production much more quickly than their sales increase. In both markets, product affordability is near record high levels. Comerica Bank estimates that the average household now needs 22 weeks of income to buy the average car. This is down from 25 weeks in 2005-07 and 30 weeks in 1995-97.  It is also well below the 24 week average during the last recession. Only a recovery in confidence and income is needed to yield 20% or more production gains extending for a year or more.

Auto sales are less complicated than home sales so the expected jump in sales will happen first for cars. What happens to car sales will reach the housing market a few months later.

The usual recovery surge in auto production and distribution facilities will not occur in 2009-11.  While recovering rapidly, auto sales, like home sales, will remain at a depressed level for several more years.  The 12.0 million sales projected for 2010 are far below the 16.0 million plus sales typical in the first full year of an economic recovery. There is massive surplus capacity both in the US and worldwide for both vehicle production and distribution. About 20% of US production and distribution (dealership) facilities are likely to be shut down in 2009-2010. This is a loss of at least $5 billion in construction work.

Ford has emerged as the star of the US industry and may surpass GM is sales soon. Ford has announced an 18% rise in 3rd quarter production schedules from a year ago and a 33% in the 4th quarter. Ford assembly and parts centers will suffer a more modest loss in the usual recovery period construction work.

In spite of the continuing depressed state of the industry, the auto industry centers in the middle of the country from Michigan to Mississippi will get a substantial economic boost compared to the rest of the economy. The impact will be largest in Michigan followed by Ohio and Indiana. After a six year depression, Detroit is about to get a substantial boost in economic activity since Ford facilities are clustered south and west of the city. Expect the auto centers to see a relatively more robust pickup in housing construction within a year but it will take longer for the auto recovery to provide a boost to nonresidential buildings and heavy construction.