Whenever rates get high, the market worries about housing but I think that’s another case of generals fighting the last war. There are global housing markets in big trouble with high rates but the US isn’t one of them.
Autos are a different story.
Prices of vehicles soared during the pandemic, along with repairs and — more recently — auto insurance premiums. Supply is still constrained and the strike isn’t helping but we’ve also run into a ceiling on just how much people can afford, especially with auto loans around 9% (though that can vary wildly depending on credit scores).
Fitch today reports that US subprime auto loans that are more than 60-days delinquent are at the highest since the data series started, in 1994.
auto delinquencies from Fitch since 2004
The prime side is still healthy but it’s looking like a good time to be in the auto repo business with 6.11% of loans past due.
“The subprime borrower is getting squeezed,” said Margaret Rowe, senior director at Fitch. “They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”
People stop making their car payments when they can’t make rent or mortgage payments. Many borrowers also owe more on the cars than they’re worth, making the decision to halt payments an easy one.
For more on the autos situation, have a look at this thread.