How severe? How about $105 billion drop in loans in just two weeks.
“This credit crunch greatly increases the chances that America is going to have a deflationary recession or depression at some point in 2023. And, in fact, we could already be in it.” Ya think?
“We’re going to see the unemployment rate start to spike in America in the second half of 2023, In fact, we’re already seeing a big increase in unemployment claims data from the Federal Reserve shows that continued unemployment claims has surged since September.”
“We’re seeing a big surge in mortgage defaults right now across America, particularly on what’s called FHA mortgages. FHA mortgages are these first-time home buyer loans that the US government sponsors and allows people to only put three to five percent down. Well, these loans now have a 12% default rate in the most recent month of February 2023.”
Debt-to-income ration is now higher than it was at the pre-subprime meltdown peak in 2008.
“The Biden Administration has been very aggressive in wanting to expand mortgage access to low-income borrowers who can’t afford these mortgages. And they do this under the guise of expanding the benefits of home ownership to everyone, but really what they’re doing is they’re saddling at-risk economic households with a lot of debt near the peak of a housing bubble.”
“When banks tighten the belt and businesses can no longer get loans, businesses have to shut down, or what businesses have to do is, they have to start liquidating their holdings and taking whatever cash they have and use it to pay expenses. This is actually a concern of mine.”
“This bank credit crunch which is occurring right now could cause even more bank runs in the future” as people pull money out of the bank to cover expenses.
Quantitative tightening is back on.
“Mortgage application demand is on par with what we saw basically in the worst of the last housing crash in 2008, 2009, 2010, and so, no, there is no recovery.”
“The regular home buyer is still out of the housing market and is not returning.”
“The money supply in America is contracting…every other time in history it contracted, which was four times, we had a depression, a panic and a banking crisis.”
Cheerful enough. But if you’re a car dealer, things are even worse:
Banks are cutting off backing loans and providing credit to dealerships.
Not just used car dealers, but even national brand, nameplate dealerships.
This all started back in 2020, when banks started lending way too much money on cars that simply aren’t worth it, to consumers that simply couldn’t afford these payments, and shouldn’t have got the car in the first place…Let’s fast forward to 2023. We’re seeing record high repossession rates, and we’re seeing record high portfolio sell-offs, where people are just liquidating their paper because they don’t want to take on the risk of all these really bad auto loans, because they owe too much money. People are not making payments and they see the value of cars going down.
The fewer banks dealers can pit each other against for loan terms, the higher the interest rate consumers have to pay.
Dealers (not the banks) are also the ones who get screwed if a customer misses their first through third car payment.
Texas car dealer: “He was floored because he sells a lot of trucks between $45- and $65,000 trucks. Four of his banks told him that they’re no longer lending over twenty five thousand dollars.” (Previously.)
“I promise you this: it’s only gonna get worse.”
But wait! It gets worse!
“Capital One is going to start pulling their floor plans from dealers.”
“Floor plans” are the lines of credit dealers use to purchase cars to populate their lots, even the big nameplate dealers.
“Dealers are overexposed right now. They have paid way too much for their inventory and now they are having a hard time selling it.”
“It is so much harder now than it has been in the last two years to get people approved for loans to be able to sell these vehicles.”
“[Banks] do not want to get stuck holding the bag on these cars.”
“Dealers have been stupid. They have overpaid and they have too much inventory right now.”
“Some of these dealers, if they’re having cars 60, 90 days and maybe they’re getting a little bit behind on their payments [the] floor plan company will actually go to these dealers lots and they will take these cars that have been sitting too long, they’ll take them to the auction.”
“If they didn’t have the cash, the liquidity, to begin with, then they have to start liquidating cars, and they have to liquidate them fast to be able to pay their flooring lines…if they lose these flooring lines, they might as well not be in business, they don’t have the cash to be able to buy more inventory to be able to sell it to make more money.”
Banks pulling their floor lines could potentially crash the whole car market.
Things are going to get worse for car dealers before it gets better, and six months from now might be a great time to buy a car, assuming you’re not too busy shooting starving looters trying to steal your canned goods…
[…] IS GOING SWIMMINGLY: Credit Crunch Crisis Carpocalypse. “Dealers are overexposed right now. They have paid way too much for their inventory and now they […]
Wait until the implications of enforced conversion to electric start to work their way through the system…
Car manufacturing has been on a path towards unsustainability since the 1980s. The prices keep going up, the mandates go right along with them. How much of the cost of your transportation results from government mandate, do you suppose?
We don’t live in a republic any more; what we’re in is more a sort of semi-democratic national socialism, where the activists use their credibility with the masses to leverage the things they want. Which, when you get down to it, mostly don’t work all that well. It’s a direct outgrowth of our over-academization of everything; the educated-past-their-innate-intelligence types have to find something to do, commensurate with their vaunted credentials, and so they go into government in order to “do good”, and not any less, lord it over the rest of us who eschewed the ridiculous stairstep to credentialed virtue.
Longer I live, the less respect I have for the “Educated”, mostly because it’s becoming increasingly clear that we’re doing all of that wrong. The system we have produces exquisitely “educated-yet-idiot” types that do nothing but damage to our lives and welfare. If you think differently, look at who is behind all the idiocy behind the homeless-industrial complex, and ask yourself if those people would have jobs, let alone purpose in life, were they living under a more sensible regime?
Regretfully, over the last seven weeks I have pulled $75,000 out of Capital1. That money had to come from somewhere; I wonder where Capital1 got it from and hope they didn’t have to squeeze dealers but they probably did. Abysmally low yields got me out of Capital1 and into a US Treasury MM fund. I’m a meanie who pays cash in full for used cars. My home mortgage would be Dodd-Frank illegal today because not enough work income even tho’ I was paying 70% down and had securities accounts worth FIVE times the mortgage amount. I didn’t want to sell any more securities. You see WHY I HATE DODD-FRANK!
My Subaru dealer seems to want to buy my used Outback which I just realized I have owned now for 7 years. I don’t want to get a newer one yet. I go places where getting an overnight recharge is improbable so I don’t want electric. Wonder how they will stay in business tho’ they’re in a Subaru-type neighborhood. Next I have to think again about the four bank stocks I own. A community bank in an obscure rural area, a regional Bank, a BIG nationwide bank once in the express business (no slaveowner custoemrs!), and a NY community bank maybe I should get out while the gettin’ good before the warehouse mortgage business craters!
I was pretty sure I had bought my last truck in 2016. A nicely set up GMC Canyon extended cab, long bed, V-6 305 HP with trailering. After some haggling (not much, I know what I want and what the actual costs are) I paid 25K out-the-door. I was 69 then. Now I’m sure it’s my last truck. Why in the hell would I need a 60K+ truck? Why would a guy in a service industry need one?
And I bought my wife a GMC Terrain, top-of the line in 2021 that may well be her last car, for 30K with a 0% loan.
I suspect Carpocalypse may be coming and rather a lot of pretty good used vehicles will be available, cheap. Maybe I’ll pick up one for my daughter.
Not sure i would trust a lot of what you linked to. As just one example, household debt to income ratios. In regards to available data, the best i could find was a direct look back in 2018 by FRB St. Louis that ended with data available to Q3 2017. Not helpful. FRB St. Louis and NY Fed have plenty of stats on debt payments as a % of disposable income (a close approximation). None come anywhere close today from 2008 and 2009. Much worse back in 2008 and 2009.
I don’t buy into the whole “dealers are sitting on too much inventory” thing, at least not here in Wyoming. I had my truck in for an oil change at the local dealer, and took a walk around their lot while it was being done.
They had fewer than a dozen new vehicle on the lot, and about twice that many used cars and trucks. Their inventory is almost non-existent, and when a sales-critter came out to see if he could help me, he noted that every single new vehicle they get from the manufacturers goes out the door within a day or two. I asked if they were discounting much from the MSRP’s; he laughed, and said that they were generally getting full price.
I wonder where these “overstocked” dealers are that they’re talking about.
“Capital One is going to start pulling their floor plans from dealers.”
“Floor plans” are the lines of credit dealers use to purchase cars to populate their lots, even the big nameplate dealers.
“It is so much harder now than it has been in the last two years to get people approved for loans to be able to sell these vehicles.”
So, if these two are true then there is a “credit crunch”.
If not then the situation is people are choosing not to get further in debt.
I am really curious as to which side it putting on the squeeze, the lenders or the borrowers.
I do find it very dubious that we;re heading for a deflationary anything. It’s not like the Democrats and the GOPe are going to slow down on their drunken sailor spending binge
By my outside perspective, overstocked dealers should be in places where people stopped being able to afford a new-to-them car. Somewhat recent because you don’t send extra inventory to a car lot that’s having a hard time selling.
I would expect one ideological demographic to be less resilient and more reliant on external help (and probably less wise about budgeting and planning and living within their means). Sounds a lot like 🔵 blue areas.
[…] IS GOING SWIMMINGLY: Credit Crunch Crisis Carpocalypse. “Dealers are overexposed right now. They have paid way too much for their inventory and now they […]
Wait until the implications of enforced conversion to electric start to work their way through the system…
Car manufacturing has been on a path towards unsustainability since the 1980s. The prices keep going up, the mandates go right along with them. How much of the cost of your transportation results from government mandate, do you suppose?
We don’t live in a republic any more; what we’re in is more a sort of semi-democratic national socialism, where the activists use their credibility with the masses to leverage the things they want. Which, when you get down to it, mostly don’t work all that well. It’s a direct outgrowth of our over-academization of everything; the educated-past-their-innate-intelligence types have to find something to do, commensurate with their vaunted credentials, and so they go into government in order to “do good”, and not any less, lord it over the rest of us who eschewed the ridiculous stairstep to credentialed virtue.
Longer I live, the less respect I have for the “Educated”, mostly because it’s becoming increasingly clear that we’re doing all of that wrong. The system we have produces exquisitely “educated-yet-idiot” types that do nothing but damage to our lives and welfare. If you think differently, look at who is behind all the idiocy behind the homeless-industrial complex, and ask yourself if those people would have jobs, let alone purpose in life, were they living under a more sensible regime?
Regretfully, over the last seven weeks I have pulled $75,000 out of Capital1. That money had to come from somewhere; I wonder where Capital1 got it from and hope they didn’t have to squeeze dealers but they probably did. Abysmally low yields got me out of Capital1 and into a US Treasury MM fund. I’m a meanie who pays cash in full for used cars. My home mortgage would be Dodd-Frank illegal today because not enough work income even tho’ I was paying 70% down and had securities accounts worth FIVE times the mortgage amount. I didn’t want to sell any more securities. You see WHY I HATE DODD-FRANK!
My Subaru dealer seems to want to buy my used Outback which I just realized I have owned now for 7 years. I don’t want to get a newer one yet. I go places where getting an overnight recharge is improbable so I don’t want electric. Wonder how they will stay in business tho’ they’re in a Subaru-type neighborhood. Next I have to think again about the four bank stocks I own. A community bank in an obscure rural area, a regional Bank, a BIG nationwide bank once in the express business (no slaveowner custoemrs!), and a NY community bank maybe I should get out while the gettin’ good before the warehouse mortgage business craters!
I was pretty sure I had bought my last truck in 2016. A nicely set up GMC Canyon extended cab, long bed, V-6 305 HP with trailering. After some haggling (not much, I know what I want and what the actual costs are) I paid 25K out-the-door. I was 69 then. Now I’m sure it’s my last truck. Why in the hell would I need a 60K+ truck? Why would a guy in a service industry need one?
And I bought my wife a GMC Terrain, top-of the line in 2021 that may well be her last car, for 30K with a 0% loan.
I suspect Carpocalypse may be coming and rather a lot of pretty good used vehicles will be available, cheap. Maybe I’ll pick up one for my daughter.
Not sure i would trust a lot of what you linked to. As just one example, household debt to income ratios. In regards to available data, the best i could find was a direct look back in 2018 by FRB St. Louis that ended with data available to Q3 2017. Not helpful. FRB St. Louis and NY Fed have plenty of stats on debt payments as a % of disposable income (a close approximation). None come anywhere close today from 2008 and 2009. Much worse back in 2008 and 2009.
I don’t buy into the whole “dealers are sitting on too much inventory” thing, at least not here in Wyoming. I had my truck in for an oil change at the local dealer, and took a walk around their lot while it was being done.
They had fewer than a dozen new vehicle on the lot, and about twice that many used cars and trucks. Their inventory is almost non-existent, and when a sales-critter came out to see if he could help me, he noted that every single new vehicle they get from the manufacturers goes out the door within a day or two. I asked if they were discounting much from the MSRP’s; he laughed, and said that they were generally getting full price.
I wonder where these “overstocked” dealers are that they’re talking about.
“Capital One is going to start pulling their floor plans from dealers.”
“Floor plans” are the lines of credit dealers use to purchase cars to populate their lots, even the big nameplate dealers.
“It is so much harder now than it has been in the last two years to get people approved for loans to be able to sell these vehicles.”
So, if these two are true then there is a “credit crunch”.
If not then the situation is people are choosing not to get further in debt.
I am really curious as to which side it putting on the squeeze, the lenders or the borrowers.
I do find it very dubious that we;re heading for a deflationary anything. It’s not like the Democrats and the GOPe are going to slow down on their drunken sailor spending binge
Blackwing1 says:
I wonder where these “overstocked” dealers are that they’re talking about.
Blue States?
I was going to say blue cities. Agreed.
By my outside perspective, overstocked dealers should be in places where people stopped being able to afford a new-to-them car. Somewhat recent because you don’t send extra inventory to a car lot that’s having a hard time selling.
I would expect one ideological demographic to be less resilient and more reliant on external help (and probably less wise about budgeting and planning and living within their means). Sounds a lot like 🔵 blue areas.