Auto Industry Collapsing
I saw this tweet over the weekend:
“The auto industry collapse has just begun and this would be one of the worst times for you to buy a vehicle.
In a normal market (pre-2020), Auto Loan delinquencies hovered at 2 to 3%.
Today, that number is exploding with nearly 1 in every 4 loans in default in Washington DC.”
The author of the tweet is Graham Stephan, a young investor and car enthusiast, and he may or may not be right.
But, what fascinates me is that only a few months ago, we were hearing about used car prices going through the roof with no end in sight.
And now, it looks like we will soon be facing a glut of cars.
Commodity Prices Collapse Too
Similarly, we were also hearing about commodity prices shooting endlessly higher only a few months ago.
But, copper, oil, wheat, and silver prices have all been plummeting as of late.
The price of wheat is especially surprising, as mass famine was predicted only a few months ago by news outlets everywhere.
The Fed was going to raise rates and push mortgage rates to 7%, we heard only a few months ago.
But, now we are seeing mortgage rates flatten and/or fall, as it is clear that the Fed does not control long-term rates and there are many other factors at play.
Even 10-Year Treasury yields remain below 3%, when there was talk of 6%+ yields only a few months ago.
This is “the biggie” for the purposes of this blog, as all of us were in a near state of panic over chronically low inventory levels only a few months ago.
And today … not so much… 😊 We are seeing inventory buildups like we have not seen for years.
It is probably a good thing too, as we are now getting back to historical norms when it comes to inventory supply and absorption rates.
Conclusion – Homebuyers Need To Ignore Hysteria; Real Estate Wins In The Long Run
I visited a home in Lafayette, CA, that was listed for $3.8 million on Friday. In 1993, I appraised a nearby home for under $400,000.
At the time, the neighborhood was considered “low-end” for Lafayette and “experts” were predicting that the real estate market would not come back for years, if at all.
Apparently, those experts were wrong… a little.
Granted, the $3.8 million listing is updated to perfection, but NOBODY would have predicted the appreciation we have seen over the last 30 years.
Everyone who bought in that neighborhood in the mid-1990s ignored the “experts” and is probably really happy they did.
I also suspect that those who bought just wanted a home and were ignoring the investment aspects in any case.
So – this blog is just another reminder that things change very quickly, so homebuyers should not get caught up in the hysteria of the moment.
This is particularly the case for owner-occupants (as opposed to investors) who are just looking for a place to make a home.
In the long run, most buyers will end up as happy as all of those homeowners in what was once a low-end Lafayette neighborhood.
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