Every time I hear that there’s no spillover from housing, I’m amazed at the number of people who actually believe it’s true.

I’ve long held the view that housing won’t show signs of recovery until 2008 or 2009, with worst-case estimates pushing that back another year. But those estimates are still dependent on what’ll happen when an estimated $1.1–1.5 trillion in ARM mortgages face resets this year, costing the average homeowner an extra $200–250 a month on a $200,000 mortgage, for example.

But it’s not just the homebuilders and lenders who are facing sharp sell-offs on the everlasting fiasco. Auto companies, too, are facing big downside risk. Just take a look at AutoNation’s reaction to the housing slump.

This’ll easily retest 2004 lows of about $15 at current pace.

But the idea of an auto slump in the face of housing deterioration is nothing new. AutoNation’s CEO Mike Jackson has long held (as mentioned by Forbes.com) that the “idea that there’s been no spillover from housing into other segments is just faulty. We all know in an economic cycle that the consumer pulls back first, pulls back on big-ticket items, capital spending continues. That’s exactly what we’re seeing.”

So it also came as no surprise that July U.S. auto sales fell thanks to fewer discounts and “effects of a weakening housing market,” says Reuters. Numbers were so bad that the Big Three managed to only account for 50% of total U.S. auto sales, as compared to a mid-80’s peak of 77%. General Motors’ sales fell 19%. Ford’s sales were down 17%. And Chrysler watched as sales fell 8%.

That accounted for 49.7% of U.S. auto sales, meaning that foreign automakers are beating us on our own turf. That comes even after aggressive U.S. auto incentives to clear inventory. Still, they were beat by foreign auto companies that were even more aggressive with incentive programs.

At current pace, don’t hold your breath for an auto turnaround in the face of housing. Mike Jackson, for one, expects for the weaker housing market to weigh on U.S. auto sales for the remainder of the year, with the biggest negative impact on pickup trucks, which account for 13% of the U.S. auto market sales.

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