Read the q3 quarterly report on US household debt and credit (here). One interest takeaway is how divergently different loans perform, vs. the GFC era.
When the GFC hit, both all loans perform badly. Transition into delinquency (30+ days) for credit cards, mortgages, and auto loans reached over 10%. Mortgages delinquency were picking up faster and looks worse than auto loans.
This time around, mortgages looks fine (as of 23q3), and delinquency is going up not only slowly but at the level even lower than 2005-06, while auto and credit cards are deteriorating at a faster rate.
By age groups, for 18-29 and 30-39, the percentage of auto loan balance falling 3-month behind is reaching about the similar level of GFC era. (Another theme: younger generation is under more pressure than the older for the past 2 years)
To reflect back, there was a shortage of cars during the pandemic and used car prices were shooting up. It could cost some money if someone bought a car back then and sold it this year, as 2nd-hand car price has been on a downward path.
The selling and downward pricing trend could be a self-reenforcing process.
Meanwhile, house is a more resilient asset class and current macro is still ok. After 10 years, houses are very likely to worth more but cars very likely won’t.
As shown with the FHFA house price index, which is keeping up.
…which is very different from the GFC era when HPI declined and under pressure for years.
