During our recent Breaking Through Summit, leaders from the auto, housing, and travel industries gave their perspectives on the economy’s bright spots and trouble spots. They zeroed in on tariffs, consumer spending, and new market developments. Sheryl Palmer, CEO of Taylor Morrison, underscored the company’s geographic diversification with operations in 12 states from Texas to Florida to North Carolina. Among the wealthy, she noticed an acute desire for new homes. At the same time, Ernie Garcia, CEO of Carvana, gave an interesting take on what consumers are thinking in the auto market, particularly in regard to price and credit stability.
Based on Palmer’s description, Taylor Morrison appeals to several different, specific demographic groups, suggesting wide-ranging attractiveness in today’s housing market. She emphasized that the company is seeing intense interest from one particular demographic. This coalition oversees more than $114 trillion in combined assets under management. This wealthy, well-educated demographic especially values customized home improvements and quality community amenities.
“I want what I want, I can afford what I want, and I don’t know what tomorrow brings so I want to live every day to the fullest,” – Sheryl Palmer, Taylor Morrison CEO.
Palmer stressed that this cohort is not exhibiting signs of market-related pressure to purchase homes. Their credit profiles continue to be very strong and stable. Though, she admitted that increased home prices and stubbornly high interest rates have created a more volatile housing market. Yes, mortgage rates shot up over 7% this week. She fears that increasing costs for the basics including insurance and food are discouraging young, first-time buyers from developing an interest in the market.
Auto Market Insights
Ernie Garcia gives a quick primer on the auto distribution industry. Specifically, he pointed to a change in consumer purchasing patterns following the announcement of tariffs. In his charge, he said he witnessed a tremendous boom in new car sales to start. Consumers desperately flooded to buy cars before the coming de facto price increases arrived. As he pointed out, this trend has recently started to plateau.
Garcia emphasized the point that consumer credit continues to be very strong, even with an economically tumultuous 2022. “I think it always feels like credit is getting worse, but I don’t think there’s a lot of evidence yet that it’s getting a lot worse,” he said. This stability is important because Carvana sells cars to a much more diverse customer base with members across all age cohorts.
What’s more, contrary to the sharp used car price boom we saw in 2021, 2022 and up until this spring, Garcia found that used car prices have decreased. In stark contrast, used online dealer Carvana recently announced a stunning 46% YOY sales growth which spurred record-breaking quarterly earnings. This performance highlights the ongoing challenge to the auto market’s remarkable resilience in the face of shifting economic winds.
“The consumer is coming back with a vengeance,” – Barry Biffle, Frontier Group CEO.
Trends in Consumer Behavior
As the economy changes and grows, industry executives are seeing something new. An apparent, lasting change in consumer behavior. To illustrate, Sheryl Palmer recently commented on how the COVID-19 pandemic has shifted what homebuyers want and why they’re moving. Covid truly shook up this cohort, she said, arguing that people are in a place to be more intentional about what they buy.
Executives mentioned that given the reality of inflation-price increases, consumers are getting more smart and more deliberate with their purchases. They’re readying themselves anticipating future spikes in costs and now, shifting their buying patterns to compliment that.
As Anthony Capuano, CEO of Marriott International said during the State of the Industry address, stability and high consumer confidence are a recipe for danger. He noted that the travel demand has returned. All of these innovations aside, the economic climate overall holds perhaps the biggest sway over consumer choices.
“The reality is this; our business thrives in times of stability and high consumer confidence,” – Anthony Capuano, Marriott International CEO.