Should we all be concerned about this?

Question

I guess these people become renters if they aren't already.  Does this increase in subprime auto defaults signal warning signs for housing?  Please let me know your thoughts.

https://seekingalpha.com/news/3432369-auto-loan-de...

Charles Soper · Answer

This has been on my radar for the last 18 - 24 months or so. I forget where I first heard about it but much like people doing stated income nothing down mortgages 10+ years ago, auto loans are the new sub-prime market waiting to burst. For many years you've been able to drive through a C or D neighborhood and see a run-down shack with a Mercedes, Lexus, or Tesla out front, at least in the AZ and FL suburbs where I've lived in the last 10 years.

Good news for those that will be in the market for a nice car in the next few years, they'll be available for pennies on the dollar!

Karen A. · Answer

@Elise Hazzard,  Most of them work a corporate office job, although the wife of one couple is a teacher.  Another couple is in healthcare, and another guy sells/services residential water treatment systems.  It's all over the board, really.

Elise Hazzard · Answer

@Karen Arehart,  Im very surprised to hear that too.

Are you / your friends in the field of education??

Anecdotally, we sold a flip property to an educator who made use of one of a loan program for educators (?teacher next door) and did not bring any funds to closing.

Interesting.

Karen A. · Answer

Over the last 2-3 years I've had about 7 friends/co-workers buy houses in my area.  I've been shocked to see that for a down payment, they're putting 1.8% of the purchase down.  Is that all that lenders are requiring these days?  Only 1.8%???

Brian Ellis · Answer

They are offering sub-prime loans to homebuyers too. But they are fixed rate now.

Jay Hinrichs · Answer

those that buy sub prime loans are not banks or credit unions its mainly larger private investors. One of my clients owns a few dealerships in Portland and they also own one of the larger buyers of sub prime auto paper.. So while it could have some affect but I dont think it has a lot on real estate per se.. a sub prime auto buyer is not going to be buying any real estate with that credit.. it may bounce down ficos for renters and landlords will have to consider that in their credit runs

Mitchell Jaworski · Answer

Seems the U.S. consumer does not learn from there mistakes just a decade ago.  Not to mention the crux of the student debt bubble is set to it in 2022 from alot of research I have seen.  Should be interesting.

Should we all be concerned about this?

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