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Homes and cars are simply out of control. People are getting mortgage sized loans just to buy a family car. Something which will become worthless over 10 years

Homes and cars are simply out of control. People are getting mortgage sized loans just to buy a family car. Something which will become worthless over 10 years of use. Getting a mortgage on a home is now a non-starter for a huge swath of the population. I suppose I can somewhat understand the price of homes going up. It's a durable item that, if reasonably maintained, has an unlimited useful life. A car on the other hand, no matter how well maintained, will become worthless in a decade. Freewheeling monetary policy does not just impact which cars a person is able to buy. It more insidiously impacts that cars which manufacturers choose to design and build. Even entry level cars are packed with features and electronics and carry a near $30k price tag. It's not going to be so easy for the industry to get back to building simple and cheap cars.

xyzelement 4y ago
// People are getting mortgage sized loans just to buy a family car I mean... That's insane hyperbole right? Below you are talking about $30k cars, in what universe does that approach "mortgage sized"?
- lazide 4y ago
  Depending on your selection of ‘people’ it isn’t that odd - anyone financing a Tesla Model X for instance, is looking at $120k+ prices, and there are a LOT of them in many parts of the Bay Area.
  - yamtaddle 4y ago
    To be fair, I don't think the people dropping $120k on a car are also in the market for $120k houses. Now, trucks... I've seen some houses where the truck parked out front may well have rivaled the cost of the house. Of course rural-American housing in boring areas (no skiing or nice views or anything to draw tourists or vacation-homers) still being very cheap contributes to that kind of situation.
- mberning 4y ago
  A $30k car would be something basic like a corolla or civic. When you start talking about larger family cars, $50k is really the low end of what you find on dealer lots. Bear in mind, the MSRP of a vehicle and what you can actually find to buy is quite different. And $50k is a common entry point. Prices escalate quickly from there. My point being that you used to be able to buy a new car such as a civic or corolla for closer to $10k than $30k. I bought a brand new Mazda 3 for $13k in 2006. And there were tons of them on the dealer lot and they worked with me on the price. Nowadays if you head down to the Mazda dealer you might be lucky to find one just under $30k.
- Mezzie 4y ago
  It's actually difficult to get mortgages for that small an amount. There were lots of properties here (MI) in that price range post 2008 and my dad ended up buying a house with a credit card because it was easier than trying to get a mortgage for that amount.
- PaulHoule 4y ago
  Funny I just was in line at my credit union and caught a look at their balance sheet. In October they had $281,996,350 outstanding in auto loans compared to $462,003,191 in mortgage loans and $68,035,664 in HELOC. Auto loans turned out to be bigger relative to mortgages than I expected but maybe my credit union writes a lot of auto loans.
  - Ekaros 4y ago
    And my understanding is that rates for car loans as they are potentially unsecured are much higher. So burden of carry is higher.
  - xyzelement 4y ago
    One thing that could be in play is mortgage originators often sell loans to other investors post-origination. I am talking about Fanny Mae and Freddy Mac and others, who hold a ton of homeowner debt on their books. 460 million of loans is about 1000 average-sized mortgages at issuance - if your CU's entire business was 1000 loans they'd probably not bother with it since the staff and infrastructure to do it is such a pain in the ass. Chances are this represents some unknown percentage of total issuance that just happened to not have been sold.
rightbyte 4y ago
> A car on the other hand, no matter how well maintained, will become worthless in a decade. Uhm ... my 24yo Volvo disagrees. The resale price of 120k+ mile cars is silly low compared to the value you get from using them. Don't tell anyone though. I want this market for my self.

xyzelement 4y ago

// People are getting mortgage sized loans just to buy a family car I mean... That's insane hyperbole right? Below you are talking about $30k cars, in what universe does that approach "mortgage sized"?

lazide 4y ago
Depending on your selection of ‘people’ it isn’t that odd - anyone financing a Tesla Model X for instance, is looking at $120k+ prices, and there are a LOT of them in many parts of the Bay Area.
- yamtaddle 4y ago
  To be fair, I don't think the people dropping $120k on a car are also in the market for $120k houses. Now, trucks... I've seen some houses where the truck parked out front may well have rivaled the cost of the house. Of course rural-American housing in boring areas (no skiing or nice views or anything to draw tourists or vacation-homers) still being very cheap contributes to that kind of situation.
mberning 4y ago
A $30k car would be something basic like a corolla or civic. When you start talking about larger family cars, $50k is really the low end of what you find on dealer lots. Bear in mind, the MSRP of a vehicle and what you can actually find to buy is quite different. And $50k is a common entry point. Prices escalate quickly from there. My point being that you used to be able to buy a new car such as a civic or corolla for closer to $10k than $30k. I bought a brand new Mazda 3 for $13k in 2006. And there were tons of them on the dealer lot and they worked with me on the price. Nowadays if you head down to the Mazda dealer you might be lucky to find one just under $30k.
Mezzie 4y ago
It's actually difficult to get mortgages for that small an amount. There were lots of properties here (MI) in that price range post 2008 and my dad ended up buying a house with a credit card because it was easier than trying to get a mortgage for that amount.
PaulHoule 4y ago
Funny I just was in line at my credit union and caught a look at their balance sheet. In October they had $281,996,350 outstanding in auto loans compared to $462,003,191 in mortgage loans and $68,035,664 in HELOC. Auto loans turned out to be bigger relative to mortgages than I expected but maybe my credit union writes a lot of auto loans.
- Ekaros 4y ago
  And my understanding is that rates for car loans as they are potentially unsecured are much higher. So burden of carry is higher.
- xyzelement 4y ago
  One thing that could be in play is mortgage originators often sell loans to other investors post-origination. I am talking about Fanny Mae and Freddy Mac and others, who hold a ton of homeowner debt on their books. 460 million of loans is about 1000 average-sized mortgages at issuance - if your CU's entire business was 1000 loans they'd probably not bother with it since the staff and infrastructure to do it is such a pain in the ass. Chances are this represents some unknown percentage of total issuance that just happened to not have been sold.

rightbyte 4y ago

> A car on the other hand, no matter how well maintained, will become worthless in a decade. Uhm ... my 24yo Volvo disagrees. The resale price of 120k+ mile cars is silly low compared to the value you get from using them. Don't tell anyone though. I want this market for my self.