Monday, April 13, 2009

A Lotta Lots


Seems there's a bubble in auto dealerships according to CoStar

According to the National Automobile Dealers Association (NADA), approximately 900 dealerships closed and 200 dealerships opened in 2008, for a net loss of 700 dealerships, leaving the country with approximately 20,000 franchised auto dealers. According to Detroit-based research and advisory firm, Urban Science, 2008's decline in auto dealership count is the largest the firm has recorded since it started collecting data in 1991. For 2009, the NADA forecasts a net loss of 900 additional dealerships.

I'll take the over on that 900.
Considering the NADA's estimate that 900 dealerships could close in 2009, this translates into another 13 million to 16 million square feet of buildings and 3,600 to 4,500 acres of land becoming vacant.

Breuer added that the industry is over-saturated with domestic brands (approximately 70% of the 20,000 dealerships are domestic brands), so even if the "Big Three" pull through, there will inevitably be a high level domestic dealership closures. At most risk are dealerships selling only one brand of domestic cars. Of dealership closures last year, 66% were single-brand, and according to Urban Science, about 80% were domestic-brand.

The municipal sales tax revenue declines for some local governments is going to definitely trigger defaults.

23 comments:

wagga said...

First amazing fact is that 200 dealerships opened!

What were they thinking?

Captain Nemo said...

"Staging" on steroids?

Last week, there was a program on my local public radio station that described the lengths some sellers are going to in staging properties -- this now includes hiring actors to pretend to be living in the development, so as to give the impression to prospective buyers that they will be joining a friendly and active community. After they buy, they realize that they are alone in the development.

1.44MB said...

Yikes either you've been halo scanned or everyone is hard at work.

Lots of pain still yet to come - re your comment on CR this morning about people still not being disgusted by RE as an investment: Do you think that this is only a matter of time or is there a chance that this time it's different and the idea won't fully die out as much as in the previous busts - we all have a bit of casey in us now?

I'm just a fairly young 'un and an implant for lands afar so I haven't the experience on the ground with how it went down previously and how the dinner conversations changed over time.

1.44MB said...

Just like buses. You wait for hrs and then 3 arrive at once.

Rob Dawg said...

I have no idea why this was up for hours with no comments. Maybe there's blog fatigue.

I'm doing my taxes. Not bad but tedious.

When it comes to cyclical businesses there's just no way we can avoid returning to a bottom where people are disgusted at the thought of real estate as an investment. IMO all we are seeing now are the greater fools who were priced out of buying at the top. The rest are investor types who think they are averaging down. Stupid but stupid is the word these days.

The dinner table conversations are an entire post of their own. It's difficult to talk about because you have to either call your relatives asshats or idiots or liars.

TJ and Bear was shocked to hear me wavering on whether this is a pause on the way down or the start of a persistent bottom. Truth is I'm just no longer willing to call the possibility this is the start of a long bottom impossible. Stock market however still has a mother of all ass whoopings coming.

H Simpson said...

Dawg

9am your time today was great comedy on cnbc. Noon time pep talk got derailed by 2 money managers who said the market will soon be tanking when CRE exposure shows up.

No matter what kind of happy talk the CNBC jesters tried, the 2 managers were not swayed. Like two Navy SEALS with commando knives slicing up all the party balloons.



Anyone else noticing crime is up?
Especially bank robberies. I don't understand that one. That is NOT where the money is anymore..

h.

ps used Taxcut after 15 years of turbotax today as TT had hiked prices close to 100% for what I need to file. Man, Taxcut is SO much faster even using last year's TT files.

Nice marketing job Intuit. You going to be selling your nose on eBay?

Greedy SOBs without the connections for free taxpayer money.

Too bad we cannot switch Congressmen with the same ease.

H Simpson said...

Sorry for the hijack.

One thing I hope you are all noticing is the smaller used car lots.

Notice they have 1/3-1/2 the number of cars on their lot?
Been getting worse for 4 months.

They cannot get any of the low cost credit from the banks and/or do not want to pay for slow moving merchandise..


I was also talking to a guy who crews on my sailboat last weekend. He was laid off from a Japanese dealer when they folded in Oct. He found a job at another dealership of the same brand. I asked how business is doing and he said it was not bad, as a lot of the big dealerships are shedding the underperforming brands and sending the customers insisting on that model to his dealership.

h.

Rob Dawg said...

I saw about 15 seconds of that CNBC triple box. Comedy gold.

Crime is up because "opportunity" is down. People miss this aspect. People don't turn to crime because they are desperate, they turn to crime because other paths are closed off. Employment at the fringes this time is the proximate cause. Crime is stupid, don't expect smart crimes as the amateurs join in.

I will look at Taxcut next year after using Macintax since 1988. No, not a typo. Yeah, the price bump but at least the State is free.

My problem with switching my Congresscritter is that mine is one of the ones we want to keep. the only non-lawyer on Judiciary, he's a pleasant easygoing type with an accessible staff. I hate the trite; "all the congress is horrible except my own" but this might be the exception that proves the rule.

1.44MB said...

I suppose the confidence in RE as an investment falls in the same way the stock market does - with a few suckers rallies on the way down which must be what I'm experiencing now. I have the acquaintance of a couple of Marty Rodriguez' foot soldiers and just before Christmas last year I thought I'd finally worn them down after 3 years of chipping away and being called insane they were finally murmering things like 'further reductions'. Now they're trilling about how the spring bounce is here and all of the trade up buyers in the San Gabriel Foothills snapping up all the 1.5 - 2MM houses that are now only 800-900k. These buyers are primed for the next bounce donchaknow.
Head slapping stuff for sure but I understand their frame of reference given the goldfish bowl they swim in.
On the other hand I was out cycling with a friend who has a conservative low 8 figure net worth built over 30 years in RE investment in the same geographical area. Lots of value to not much loan type stuff, well insulated against vacancies, falling rents etc. Up until very recently I'd considered him sage counsel and well grounded. Since christmas he's gone all out on another buying round and this weekend was saying he expectes current values to double (really) in the next 5 years. Utter lunacy. Yet I'm at the dinner parties and these people are still out pontificating loud and proud with this stuff and judging by all the nodding heads the moment where 'everyone knows RE is a suckers bet' is a loooong way off.

Captain Nemo said...

Re: RE investment

With the mortgage on my rental property at 2.5% (that's not a typo), my rental properties are bringing home the bacon. For the first year ever, they might show a profit on my tax return in 2009. Value of my rental portfolio is probably off a little from the peak, but not too much; but they did not rise too much during the bubble years. Still, they are worth a lot more than I paid for them.

Son of Brock Landers said...

Besides writing my check for the spenddthrifts, my quarterly taxes went up this year, whatever happened to a tax cut for 95% of americans? Hope & Change.

Captain Nemo said...

Would someone please explain the Streisand Effect to these idiots?

H Simpson said...

with President Obama opening up relations with Cuba without asking for a single item in return, I think we ought to give free 1 way tickets to Casey and his ilk to visit the island county.

After Mariel, I think turnabout is fair play. They dumped their riff raft on us, now it is our turn.


So what do we have to do to pull this off? Beans and rice, our vegan lad will fit right in.

I got 50 bucks toward sunshine's ticket...

h.

tj and the bear said...
This comment has been removed by the author.
tj and the bear said...
This comment has been removed by the author.
tj and the bear said...

Truth is I'm just no longer willing to call the possibility this is the start of a long bottom impossible.I'm not. Every time I go back and review the data I'm convinced the worst is still ahead of us.

p.s.: For taxes I've had a killer CPA for the past 17 years and you couldn't drag me away from her.

tj and the bear said...

Dang. Preview and publish just aren't giving the same results, so my paragraphs ran together. Ugh.

tj and the bear said...

WELL... that was embarassing!

I just opened my mouth and stuck two feet into it on Jim's site.

I guess I'm all charged up tonight. First, you start talking about "possibilities", then I listen to Rich talk about "reasonable" and BOOM I make a fool of myself.

Such is life.

Peripheral Visionary said...

I actually see new dealerships coming; the European type, where they have lots of nice glossy brochures showing you what your car will look like after you order it and commit to pay for it. If you're lucky, they might actually have a floor model you can take for a test drive.

But the massive car lot, with rows of cars sitting depreciating while the dealership is paying interest to the bank for huge inventory, is a business model whose time has come and gone and should be have been long forgotten by now.

On taxes, I've been using H&R Block's online tax for the last few years as it's free for Federal, then just do the state taxes myself (and a couple of states I've lived in have had surprisingly easy to use online tax forms.) I did TurboTax back in the day, but my financial situation has simplified considerably since then, and it's just easier to use a simple online service. Oh for a more simple tax structure; I hope to dramatically simplified taxes in my lifetime, but I'm not holding my breath.

Bill in NC said...

New vehicle inventory was financed by domestic automakers.

Guess that'll change!

No auto dealer had the credit to carry that many shiny new cars/trucks with only a local bank loan.

As for taxes, I'd never store my SSN on an online site, no matter how secure the comany claimed their servers were against hacking.

And my state is now out of money, so refunds will now take "up to 12 weeks"

Maybe we'll get scrip like Kalifornia has done in the past.

I will be cutting my quarterly estimates significantly to make sure I owe my state for 2009.

Property Flopper said...

Speaking of CA being broke... "Big NEWS!", tax revenues aren't matching the ubber-rosey projections used for the last budget hack.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/13/BAM1171QC1.DTL

Looks like they'll be at it again. When will they just capitulate and do a realistic budget (with the extra taxes and MAJOR cuts needed?)

Rob Dawg said...

Prop,
Thanks for the reminder. I was planning a post on that but Sun night the release wasn't yet up.

w said...

@Rob,

Speaking of taxes...just got the taxes back. Those avocados were a gift from Aequitas. Maybe next year I'll actually pick some.