How credit card and auto delinquencies affect housing

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the delinquency data on credit cards and car loans and how that affects the housing market.  Related to this episode:  Credit card and auto loan delinquencies look like 2008. Housing does not https://www.housingwire.com/articles/card-auto-delinquencies-housing-2008/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire https://lnk.bio/housingwire  The Top 5:  CoStar to buy Zonda from MidOcean Partners https://www.housingwire.com/articles/costar-buy-zonda-midocean/  NAR urges DOJ and FTC to issue clear guidance on MLSs https://www.housingwire.com/articles/nar-doj-ftc-mls-procompetitive/  Is Zillow a public utility? Attorneys weigh in on MRED, Compass suit https://www.housingwire.com/articles/zillow-antitrust-mred-compass/  Fair housing groups sue CFPB, Vought over ECOA lending rule https://www.housingwire.com/articles/fair-lending-cfpb-vought/  What happens to mortgage rates if the Iran conflict is over? https://www.housingwire.com/articles/what-happens-to-mortgage-rates-if-the-iran-conflict-is-over/

Transcript

00:09Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about serious delinquencies

00:15and renters versus homeowner credit profiles. First, I want to recap the top five trending

00:20stories on housingwire.com. First up is co-star buying Zonda, which we broke this morning,

00:26followed by NAR urging the DOJ and FTC to issue clear guidance on MLSs. I think we need some more

00:33acronyms in that headline. We also have an article asking if Zillow is now a public utility.

00:38And in fair housing news, we have groups suing the CFPB over the ECOA lending rule. And of course,

00:44Logan's what happens to mortgage rates if the Iran conflict is over, still climbing the charts there,

00:50driving a lot of interest. Speaking of Logan, welcome back to the podcast.

00:54Chart daddy number one every day this week for a reason, because the drama actually, you know what,

01:00it's Friday morning, and it's very calm. It is a very, very calm Friday, because I think

01:07a lot of people are coming to the conclusion that this is working itself to a deal. And it's just

01:15nice to wake up and not, you know, do multiple videos on this headline or that headline. President

01:22Trump kind of talked about, you know, needing, let's, let's, let's get this together. And let's

01:26get this done. Iran is kind of, okay, let's get this together. But that could have been it, Sarah.

01:32That could have, the worst might be over and we, we, we move forward. But, you know, there was,

01:37there was other economic news, which I, which I really like, but, you know, for us, you know,

01:41we do the nerd tour, right. And, you know, you, 31 events to so far this year, you know,

01:48somebody asked me, they're like, how do you do it? That's a lot. And you've, you and I've had this

01:53talk, you know, you know, how do you get, how do you keep your energy? So I'm just giving you

01:56guys

01:56like four key points for you guys who travel. Number one, y'all need to drink a lot of water.

02:04And anytime you could drink water, drink water at events. Number two, see, I don't drink. So it's

02:11not an issue for me. Some of y'all drink too much at events. Okay. And you don't drink water.

02:16That's

02:16a very, very bad thing. And number three, what advice I gave you, Sarah, you guys don't have to

02:22eat unhealthy food all the time at the events. I know they have really nice meals. But if you can

02:27have a salmon salad, you know, if there's every time you can get a salmon salad, have one,

02:33and also bring your vitamins with you. And I always talk about, you know, omega fatty acid

02:39vitamins, you know, make sure you try to stay somewhat hydrated, try to eat somewhat healthy,

02:46and then, you know, you'll perform better. You're not going to be the chart daddy because our stuff

02:50is legendary. And if you're those of you who want to see the nerd tour, hey, go press that housing

02:56wire, press that hwmedia.com. It's a religious experience. But the topic today is

03:02what we talk about the credit data. Okay, okay, we can jump into that. But you're not just going

03:07to throw out there and be like, like I told you, Sarah, stop eating all this unhealthy food. Just

03:12want to make a note here that it's not like I eat unhealthy food all the time. But what happens

03:17is

03:17we get invited to these really nice dinners. They have really fancy food, and I'm not used to it. And

03:22and then I'm just like, just throws me off. And I'm like, Oh, what I feel so sluggish. So I

03:27just want

03:28to put that caveat in there. So I'm very it was you had fancy food. And you know, you don't

03:32need to

03:32eat fancy food all the time. There are a salmon, you know, stuff like that. But in any case,

03:38you know, housing wire, we have an app now housing wire, intelligence is our way of teaching everyone

03:45your local area. But part of the nerd tour is to teach to credit data. And what happened this week,

03:53the savings rate in America is now down to 2.6%. That's the low of the year. And the average

04:00a 12 month average is running at 4%. So the reason I wrote that article on Friday to show the

04:05credit

04:05data is that I think a lot of people are misreading the, you know, the New York Fed 90 day

04:12delinquencies,

04:13because if you look at the credit card and auto loan, 90 day delinquencies, it's pretty much at the

04:20peak of 2008 level. I think it was 2010 when the peak was there. And a lot of smart economists

04:28are

04:28going on social media and say, hey, this is a very big concern. What I've always talked about on the

04:33nerd tour is that rental financials are different than homeowner financials. So the charts that we

04:37put into that article really show the difference, but also the percentages that we show are much

04:44different than what the 90 day delinquency is. To make a very complicated story short, because we

04:49put the Federal Reserve article in there to try to explain that. If you get 90 days and on, you

04:56stay

04:56on the credit profile for a very long time. So that's why the percentages can increase higher and

05:01higher. But the 30 days or the total delinquency data has actually been trending a little bit lower

05:07recently. And the Federal Reserve kind of goes into that to a degree, but it's not as dire as some

05:13people think it is. Because you see this for the last three or four years ago, the credit card

05:17delinquencies and the auto loan delinquencies. Guys, it is going to be June of 2026. There's no

05:22recession, right? So if you're using the credit data or the $1.2 trillion of credit card debt,

05:27because the $1.2 trillion of credit, it always rises in an expansion. So that's obviously that

05:32didn't work out. Kind of read that article, kind of read how the Federal Reserve looks into it. I think

05:37the Federal Reserve hasn't done the best job of explaining this. And it puts it in a little bit of

05:42context. But homeowners financials are so much better now in the last 15 years. But even if you

05:47compare them to renter financials, a lot of the overall stress is always going to be higher on

05:52renter financials. Interesting you say that. So I was just listening to a recent episode of Animal

05:57Spirits. I know you love that podcast. You've been on that podcast. We like those guys. And they were

06:02talking about not only the car loan delinquencies, but the loan amounts, the monthly payments that

06:09people have on their car loans is so much higher now than it used to be. Like maybe $300, $400

06:13used

06:13to be normal. Now it's like $700, $900, even $1,000. And they were talking about how after COVID,

06:19it just drove car prices in a really terrible direction. So I think that that's different

06:25too, right? It's not just like, oh, people have car loans, but they have really expensive car loans.

06:29Well, bigger the loan amount. And then of course, short-term rates are higher.

06:35Naturally, when car prices rise, when everything rises, the borrowing costs and the price,

06:39because you have to borrow so much. It's one of the things about housing economics that doesn't

06:45get talked about a lot. If you have two cars and you're averaging $750 each, it takes away some of

06:51your buying power away into that. But also auto loans never had a qualified mortgage.

06:59That is one area that they did not want to put the qualified mortgage into that. Now,

07:07auto loans and credit card delinquencies are part of that article. You can see the charts and it doesn't

07:13look as bad when you actually take the 90-day delinquencies and realize that that gets extended

07:18out and it stays on the credit data line for a very, very long time. But that's just a reality

07:25of the post-COVID world. Everything kind of goes up in prices. Yeah. I think you did a great job

07:31in

07:31that article explaining kind of what's going on there and also the charts you included, as always.

07:36Very instructive. Yeah. I think this week was, you know, finally we're talking back to economics and

07:42a lot of people just took the savings rates falling and credit card delinquencies 90 days or,

07:48you know, and they frame it like everyone's tapped out. No one's, you know, and then this has been

07:55going on for years now. This isn't just not recently. So always remember every single year

08:02people consume a certain amount of goods and services. It's really rare, like to have retail

08:08sales be negative in any meaningful way on a year over year basis. But hopefully that article not only

08:14talked about how homeowners are just so much in a better financial position. A lot of people forget

08:19there used to be so much more bankruptcies filed before the 2005 bankruptcy reform law, that the

08:25credit datas were a lot worse in terms of bankruptcies. And then when the 2005 bankruptcy reform laws came

08:31in, which nobody ever talks about, Sarah, literally, I think I'm the only person that ever talks about

08:35anymore. All the credit data started to change and it kind of moved with foreclosures and bankruptcies

08:41together on a one-to-one basis. And now we have almost basically 21 years worth of data on this

08:48when those two laws were implemented. So it just, hopefully that gives a little bit of scale data.

08:53And we added the Federal Reserve's article in this to try to explain why they're not so alarmed about the

08:59credit stress data and why we're still, you know, I mean, if it wasn't for COVID, we'd still be in

09:05the

09:05longest economic and job expansion in history. And everything's a process. Everything has to be

09:11modeled and just, and showed out. But there was a lot of that talk, which I actually love because

09:16we're, we're talking less about the Iran situation and more about, you know, back to economics and the

09:2110 year yields at last time I checked 4.44%. And we can move forward with, with, with a lot

09:28of things.

09:28Love that. I love that we, you know, maybe we have taken a variable out or at least a variable

09:33that's going to affect housing. There's still lots to be decided, obviously. Okay. What other

09:37economic things are you looking at? Well, you know, going out now in the future, of course,

09:43we're going to get the tracker data by the time this podcast comes out. And just remember we have

09:47the holiday week. So for two weeks, the tracker data gets, gets tilted. So you don't really want

09:53to put too much weight into a holiday data, but we're getting close to that one year anniversary of

09:59the, when did the housing market shift? Yeah. Mid June last year, mid June last year, but it's also

10:05shifted in a different way. I just think a lot of people saw inventory is about to escalate. And so

10:09far, we just don't have a lot of data when, when rates go a little bit lower and demand picks

10:16up a

10:17little bit, you know, the ability for inventory to escalate out of control, just, we don't have it

10:22now after qualified mortgage kind of went in. So I always frame it as credit channels run inventory

10:27channels since 70 and 80% of home sellers or buyers, they're just sitting there and waiting for that

10:33house to buy an inventory. It just doesn't have the ability to escalate up like it did from 2005 to

10:382007, but going out in the future, we know, we don't necessarily have a little extreme low bar that we

10:44did in 2025. Remember last year, the main talking point was all the existing home sales data from the

10:50month of June to October that will be reported in July to November will be positive year over year, just

10:56because of the low bar and the forward looking data held up a little bit better with higher rates.

11:00But now we don't necessarily have the low bar, but the pending sales, can we get 237,000? That was

11:07a forecast for this year in 2026, 237,000 more existing home sales than last year. If rates could

11:14stay six and a quarter under now, of course that didn't happen after the conflict, but can we get

11:20another little push going? If rates could come down a little bit more and maybe hit that target,

11:26that'll be the interesting thing. And again, when you track things weekly, you have a better idea of

11:31it, can it happen or not? In late 2022, purchase application data was never positive year over

11:37year, but our forward looking data has got better for 12 straight weeks, 12 straight weeks. It gave us

11:42one of the biggest month to month home sales prints in history, almost 400,000 just in one month.

11:50In mid 2024, purchase application data was not positive year over year, but our forward looking

11:55data got better. We said, this is going to be, demand's going to get better. We got a couple

11:59hundred thousand last year, the same thing. We bottomed out in June. We got a nine month high

12:04in sales in December. So of course, can we get another one of these in the second half

12:09of the year? And oddly enough, our best sales data typically comes in the winter

12:14on a monthly existing home sales basis. So we'll see if that goes out in the future. Just kind of

12:20take, remember the tracker data does have the Memorial Day weekend variable into it.

12:27Okay. So like you said, mid-June last year, we started to see the market shift because mortgage

12:33rates went down. And so we had more demand. So once we get into mid-June this year, we've got

12:38harder

12:38comps from last year, right? Because things were going better. And we're not, where are we like,

12:43where are we with mortgage rates this year compared to mid-June last year?

12:46So we're still lower year over year. And it was really past mid-June that the rates started to

12:54get below 6.64. We have target levels that when we see our data improve, it's usually when rates

13:00get below 6.64 and head towards six. I think I've been on CNBC three, four years in a row,

13:05just saying

13:05the same thing. You don't need three, four, or five, but you do need near 6% as long as

13:12it could

13:12stay there. See, that's what we had early in the year. We had near six, no volatility. Oh, could you

13:17imagine if we ran the entire year now, knowing what we know that we had the snowstorm and the conflict,

13:24a lot of people are, nobody's going to buy a house. Nobody's going to file purchase application data

13:28with the war and all that. They did, you know, and, but we'll see if we can catch up on

13:33this.

13:34So exciting. Can't wait for this weekend. Maybe, like I said, maybe by the time we listen to this,

13:39it'll be Monday. Maybe you would have had-

13:40Just know I had two days of really good Call of Duty playing.

13:45We need to know all about that. And thank you for sharing your health tips at the beginning.

13:49You know, that's funny, but literally you do have a lot of people ask you about that. I know even

13:53when

13:53we're at events, people ask you about that because you always have so much energy and you just run

13:58around stage and you, you know, you do event after event back to back. And so you think of it

14:03as kind

14:04of like being in season. As my high school basketball coach once said, coach or actually

14:11Captain Morshami has unmatched enthusiasm and that's never changed, right? And part of that is

14:18you physically have to be able to do that. And, you know, I'm not, not, uh, not 21 anymore,

14:23of course, but when you're 50, you've really got to make sure to take care of the body.

14:27Oh my gosh. Well, appreciate you as always, Logan, and we will talk again soon.

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