Principal at Zonda - Trusted advisor to homebuilders, build-to-rent operators, developers, and lenders / capital providers. Contact me for market studies, feasibility studies, MUD/PID/TIRZ studies, etc.
Some consumers are struggling with debt: * 12.3% of credit card debt is 90+ days past due * 5.0% of auto loans are 90+ days past due These are the highest delinquency rates since the Great Recession. Rising delinquencies are moving from unsecured debt (credit cards) to secured debt (auto loans). It isn't just a credit report ding, they are losing property. As shown below, as credit card delinquencies move higher, mortgage rate delinquencies tend to increase as well. We haven't seen that happen significantly yet. What is most concerning to me is delinquency rates are rising in an economy that has job growth and low unemployment. If that changes, some consumer groups will have little, if any, cushion to absorb a weaker economy (job losses, lower income, etc.). For the new home market, pay attention to the entry-level market. While move-up and luxury buyers are somewhat insulated, inflation and debt already have the entry-level buyer stretched. Ali Wolf Tim Sullivan Keith Hughes Kyle Cheslock CiAnn Blue Rachael Edgerly Benjamin Bollman, MSRE Budd B. Tranica Wills, MBA Kristin Sheehan Junell DuBois
This is what continues to baffle me, highest delinquency since the GFC, historically low unemployment, and there isn't a lot of widespread concern. People who haven't priced in rising defaults to correspond with higher unemployment should ask themselves what would keep unemployment at historically low levels for a prolonged period and if that is likely.
Definitely something we watch closely! The low unemployment number is a function of supply and demand. Yes, it’s low but it is driven by a absolute shrinking of the workforce / the contraction of job opportunities. The numerator and denominator are both shrinking… so it’s a bit misleading at the current moment and of course a headwind. I think this was likely the big realization of the Fed as of late and likely the main reason for an upcoming cut or two
When are we going to have a conversation about why credit card companies are practicing legal usury with 25% interest rates?
These delinquency numbers are alarming, especially happening during decent job growth. What concerns me most is how many people are just sitting there, paralyzed, waiting for the Fed to rescue them while paying 25%+ on credit cards. The reality is that today's mortgage underwriting is still much tighter than pre-2008, and most homeowners are sitting on significant equity. Many could tap that equity to wipe out high-interest debt tomorrow, but they're stuck in quicksand hoping for rate cuts that may never come. Your entry-level buyer observation hits home - that segment is getting crushed by existing debt loads on top of housing costs. Move-up buyers have equity to work with; first-timers are just priced out entirely. If unemployment starts ticking up with consumers already this stretched, we'll see that mortgage correlation you mentioned accelerate fast. The cushion just isn't there anymore.
Thanks for sharing
Great post! There are some darker clouds in the tea leaves these days. Check the Cash-out refinance level for 2025. The highest quarterly volume since 2022! And we thought consumers would never give up those 2 and 3 % rates! https://ir.theice.com/press/news-details/2025/ICE-Mortgage-Monitor-Mortgage-Lending-Quietly-Hits-Highest-Quarterly-Volume-Since-2022-Driven-by-Purchase-and-Cash-Out-Refinance-Loans/default.aspx
Loves New Home Sales & All Things Real Estate * Readily Available for Coffee & Conversation * Happy to Bring Some Sunshine to Your Day!
1dBryan, this reminds me of our ZNO article "Is this time different?" While there are a lot of factors that are indeed different, small shifts such as delinquent credit cards and mortgages makes me ponder the changes that are yet to happen.