First Housing Market, Next...?

[usakos]

Just when things can't even get worse;

First - it's the housing market crunch, which bled through the home furnishing to home improvement market, then the fear of student loan market, and now... the auto retail market - auto dealers are starting to feel the heat - more and more people have less cash for down payments, lots have bad credit scores, and the auto loan underwriters are starting to tightened their belts and boosting interest rates, making it hard for the average Joe's to get auto financing.

The two auto dealers who appeared on CNBC yesterday state that they are feeling the heat of the declining auto sales.

And when Bernanke speaks, it's like a bad nightmare.

So, what's going on and what's next?

Read this article at Yahoo! News.

[tazman9r]

We are all going to hell in a hand basket. We need to be saved from ourselves. Our society is so greedy for profit that we are headed toward being a second world country. We have marginalized ourselves.

Or maybe a gamble was taken in the hopes that what everyone was saying about the poor and less fiscally fortunate was true, that poor people are good people that just need a break and will make there payments.

Or that we live in a housing society that trades up so often that to have an adjustable rate mortgage that a buyer only pays the interest on (so that the bank still gets paid, hint hint) is not a bad idea because they will move on prior to the rate adjusting. (I think this is more likely the case, but it doesn't play as well on the news)

On the poor, many are good people who just don't know how to make good financial decisions. Its unfortunate, but it's true. Another part of that group just can't get a break. But that doesn't mean they need the weight of a couple hundred thousand dollars of debt hanging around their neck, either.

It's not surprising that the crunch has now bled into other areas. School loans and autos are large loan purchases, and people who can't make their mortgage payment and are trying to find the money to do so then have to make hard decisions about their priorities. We had a giant fiscal bubble burst about ten years ago, too, called the dot com bubble. I seem to remember the doom and gloom predicted over that (though it was quietly predicted to protect the record of then President Clinton). The US pulled through, as we will now, if we are allowed to recover the way we always have. By putting our heads down, our shoulders into it, and pulling out, grunting and huffing under the weight and strain. There is no magic bullet to make this easy, unless the federal government wants to drastically reduce the tax burden on EVERYBODY (to include corporations and the rich), but particularly the middle class, as that is where the loan market pinch is felt the hardest.

This country is great because of the rugged individualism that will never say die. Individual people, like the ones in this website, who are fighting to find new and unique ways to create wealth, not just make money. That's who will save the country. Policy and interest rate changes will only help or hinder a recovery.

[BusinessAdviser]

It's all related to the slowing economy. Fortunately, the economy is cyclical and will eventually come out of it, as it always has.

[usakos]

Welcome to the soon to be "Great Depression" like. Thanks to everyone who voted for Bush "twice".

[jasaunders]

and now... the auto retail market - auto dealers are starting to feel the heat - more and more people have less cash for down payments, lots have bad credit scores, and the auto loan underwriters are starting to tightened their belts and boosting interest rates, making it hard for the average Joe's to get auto financing.

Huh?

People looking for cars have bad credit scores? Are you saying the number of bad credit scores has increased? Was this caused by the recession? Where did you get this from?

Interest rates on auto loans are decreasing. They have been declining for the last month and they are at the same or lower levels than they were a year ago (depending on the length of the loan). Where are you coming up with auto loan interest rate increases?

[usakos]

Huh?

People looking for cars have bad credit scores? Are you saying the number of bad credit scores has increased? Was this caused by the recession? Where did you get this from?

Interest rates on auto loans are decreasing. They have been declining for the last month and they are at the same or lower levels than they were a year ago (depending on the length of the loan). Where are you coming up with auto loan interest rate increases?

There were two guys on CNBC yesterday morning, one if I can remember his name is Adams owner of Adams Toyota dealer in the New York area I think. The other one is a guy from elsewhere, also an owner of a car dealer, and they were dsicussing many of these issues, and how they are feeling the heat of low car sales.

The show was about auto market. Also, if you search the recent news, you may find some articles about the similar article I have posted above, and in reference to my post above.

They talked about how many of their customers barely have enough cash for down payment and or credit scores for loan financing, also how the financing companies are tightening their loan granting, blah, blah, blah...

It was an interesting topic/interview to watch.

[usakos]

Huh?

People looking for cars have bad credit scores? Are you saying the number of bad credit scores has increased? Was this caused by the recession? Where did you get this from?

Interest rates on auto loans are decreasing. They have been declining for the last month and they are at the same or lower levels than they were a year ago (depending on the length of the loan). Where are you coming up with auto loan interest rate increases?

Also, you may want to read this article at Yahoo News titled; Amid Mortgage Mess, Auto Loans Also Lag.

I didn't read that article in full as I have to go.

[BusinessAdviser]

Welcome to the soon to be "Great Depression" like. Thanks to everyone who voted for Bush "twice".

That makes no sense.

First, due to the huge lag, the start of all this began during the Clinton administration. I'll dig the data up if you need me to.

Second, I'm curious how the President could have such an effect on the economy. Feel free to offer your basis.

[BusinessAdviser]

There were two guys on CNBC yesterday morning, one if I can remember his name is Adams owner of Adams Toyota dealer in the New York area I think. The other one is a guy from elsewhere, also an owner of a car dealer, and they were dsicussing many of these issues, and how they are feeling the heat of low car sales.

The show was about auto market. Also, if you search the recent news, you may find some articles about the similar article I have posted above, and in reference to my post above.

They talked about how many of their customers barely have enough cash for down payment and or credit scores for loan financing, also how the financing companies are tightening their loan granting, blah, blah, blah...

It was an interesting topic/interview to watch.

Aren't stricter guidelines for extending credit different than rising interest rates?

[abe froman]

Aren't stricter guidelines for extending credit different than rising interest rates?

Aren't lower interest rates given to people with the best credit? Interest rates for car purchases could be 1%, but if people are struggling to pay mortgages and debt payments, their credit is probably lousy and won't qualify for the lowest rates.

[BusinessAdviser]

Aren't lower interest rates given to people with the best credit? Interest rates for car purchases could be 1%, but if people are struggling to pay mortgages and debt payments, their credit is probably lousy and won't qualify for the lowest rates.

You are correct in your statement, but this has nothing to do with the state of the economy. The original poster suggested that the struggling economy results in increasing interest rates. As Josh also alluded to, this is counterintuitive and incorrect. However, the original poster WAS correct that guidelines for approval are becoming tighter. Still, this is a separate issue from interest rates.

[jasaunders]

Let's get something straight so we don't head down the wrong path here. The media blows some things out of proportion. The majority of Americans are not struggling to pay their mortgage. A large, large, large majority of Americans continue to make payments on their mortgages. A small segment of the mortgages, subprime ARM's are the borrowers that have been in the most trouble. To say that all people are struggling to pay mortgages and have less money is wrong.

There are two variables that are going to change someones ability to pay their mortgage. Either their income goes down or their mortgage goes up. People's income hasn't been declining and unemployment is still at a very reasonable level. Monthly mortgage rates going up only affect adjustable rate mortgages, which don't make up a majority of the mortgage market.

Most people are still doing just fine in this economy. Like they say "It's a recession when your neighbor loses their job, it's a depression when you lose your job." I still don't know a single person who has lost their job.

[gofrugal]

We are throwing away 9B/month in Iraq. If we stop that drain and get that money here into the domestic market, the economy will bounce back over night.
For that money within a year we can buy back all the bad mortgages.

[abe froman]

The housing crisis that is going on right now IS overblown. But this is the canary in the coal mine. All the people with subprime loans or 15 year ARMS are a small number when compared to those who are simply over extended with non mortgage debt. People have spent a lot of money that wasn't theirs.

I live in Nebraska, hardly a hotbed of forclosures. But, on my block I know of 3 homes that have been foreclosed. I work with 2 others who have or are having theirs homes forclosed on. These last two I know both had 30 year fixed rates. Neither lost their job, or had their income go down.

I also know several people who have tried buying new cars the past few months but aren't able to because they are terribly upside down.

There was a time where it seemed banks and credit card companies were just giving money to anyone. Some of those loans shouldn't have happened. Or people should have been more aware of what they were getting into. Either way, people aren't in position to spend money like they were a couple years ago.

[BusinessAdviser]

Might shoving an additional $9 billion each month into the economy actually have any negative effects?

Also, where do you think the money spent "in Iraq" is going? Actually "into" Iraq? Or maybe back into the US economy where weapons, supplies, and other items used are produced?

And one last question, might it be a bad idea to buy back all the bad mortgages? To reward people for overextending themselves?

We are throwing away 9B/month in Iraq. If we stop that drain and get that money here into the domestic market, the economy will bounce back over night.
For that money within a year we can buy back all the bad mortgages.