More Collateral Damage From the Housing Crisis pt 1

by Chris Sturr | May 28, 2008

The fallout of the housing crisis is affecting many more people than just those who purchased a home on dicey terms (or who provided the loan, or now owns the debt). In several posts we will highlight how the current crash has been cause for concern in some unexpected places.

Today’s New York Times has a story examining how the housing crisis has hit the auto industry. The tightening of the credit markets has closed off the flow of easy financing for prospective car buyers with poor credit histories or others who would, in better times, tap into their home equity lines.

Sales of pickups (a contractor favorite) are way down.

How bad is it? Sales of new cars are down to their lowest levels since 1995. More loans are going delinquent, leading to higher losses on bad debt and swelling inventories of used cars. Subprime lenders like AmeriCredit project they will loan out just a third as much money in 2008 as they did the year before.

“It is a bleak picture, and it all hinges on the availability of financing,” said William Ryan, a financial analyst at Portales Partners who has followed the auto business for years. “The whole universe related to the auto industry is touched in some way — parts suppliers, manufacturers, salespeople, trucking people, the paint and metals industries. Even semiconductors.”

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  1. I have been a real estate investor for over 20 years (US and UK). In many ways the present market is one of the best ever for value investors who focus on real estate but operate in ways similar to Warren Buffett.Coming back to the main point of the blog post, cosmetic surgery in the US has taken a hit. I was speaking to one doctor and he said that many clients would finance their operations using their home to secure the loans. With the credit crunch and the falling house prices many people are putting off their elective procedures.

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