America's Insatiable Demand For More Expensive Cars, Larger Homes And Bigger Debts

Tyler Durden's picture

Submitted by Michael Snyder of The Economic Collapse blog,

One of the things that this era of American history will be known for is conspicuous consumption.  Even though many of us won't admit it, the truth is that almost all of us want a nice vehicle and a large home.  They say that "everything is bigger in Texas", but the same could be said for the entire nation as a whole.  As you will see below, the size of the average new home has just hit a brand new record high and so has the size of the average auto loan.  In the endless quest to achieve "the American Dream", Americans are racking up bigger debts than ever before.  Unfortunately, our paychecks are not keeping up and the middle class in the United States is steadily shrinking.  The disparity between the lifestyle that society tells us that we ought to have and the size of our actual financial resources continues to grow.  This is leading to a tremendous amount of frustration among those that can't afford to buy expensive cars and large homes.

I remember the days when paying for a car over four years seemed like a massive commitment.  But now nearly a quarter of all auto loans in the U.S. are extended out for six or seven years, and those loans have gotten larger than ever...

In the latest sign Americans are increasingly comfortable taking on more debt, auto buyers borrowed a record amount in the first quarter with the average monthly payment climbing to an all-time high of $474.


Not only that, buyers also continued to spread payments out over a longer period of time, with 24.8 percent of auto loans now coming with payment terms between six and seven years according to a new report from Experian Automotive.


That’s the highest percentage of 6 and 7-year loans Experian has ever recorded in a quarter.

Didn't the last financial crisis teach us about the dangers of being overextended?

During the first quarter 0f 2014, the size of the average auto loan soared to an all-time record $27,612.

But if you go back just five years ago it was just $24,174.

And because we are taking out such large auto loans that are extended out over such a long period of time, we are now holding on to our vehicles much longer.

According to CNBC, Americans now keep their vehicles for an average of six years and one month.

Ten years ago, it was just four years and two months.

My how things have changed.

And consumer credit as a whole has also reached a brand new all-time record high in the United States.

Consumer credit includes auto loans, but it doesn't include things like mortgages.  The following is how Investopedia defines consumer credit...

Consumer credit is basically the amount of credit used by consumers to purchase non-investment goods or services that are consumed and whose value depreciates quickly. This includes automobiles, recreational vehicles (RVs), education, boat and trailer loans but excludes debts taken out to purchase real estate or margin on investment accounts.

As you can see from the chart below, Americans were reducing their exposure to consumer credit for a little while after the last financial crisis struck, but now it is rapidly rising again at essentially the same trajectory as before...

Consumer Credit 2014

Have we learned nothing?

Meanwhile, America also seems to continue to have an insatiable demand for even larger homes.

According to Zero Hedge, the size of the average new home in the United States has just hit another brand new record high...

There was a small ray of hope just after the Lehman collapse that one of the most deplorable characteristics of US society – the relentless urge to build massive McMansions (funding questions aside) – was fading. Alas, as the Census Bureau today confirmed, that normalization in the innate desire for bigger, bigger, bigger not only did not go away but is now back with a bang.


According to just released data, both the median and average size of a new single-family home built in 2013 hit new all time highs of 2,384 and 2,598 square feet respectively.


And while it is known that in absolute number terms the total number of new home sales is still a fraction of what it was before the crisis, the one strata of new home sales which appears to not only not have been impacted but is openly flourishing once more, are the same McMansions which cater to the New Normal uberwealthy (which incidentally are the same as the Old Normal uberwealthy, only wealthier) and which for many symbolize America’s unbridled greed for mega housing no matter the cost.

There is certainly nothing wrong with having a large home.

But if people are overextending themselves financially, that is when it becomes a major problem.

Just remember what happened back in 2007.

And just like prior to the last financial crisis, Americans are treating their homes like piggy banks once again.  Home equity lines of credit are up 8 percent over the past 12 months, and homeowners are increasingly being encouraged to put their homes at risk to fund their excessive lifestyles.

But there has been one big change that we have seen since the last financial crisis.

Lending standards have gotten a lot tougher, and many younger adults find that they are not able to buy homes even though they would really like to.  Stifled by absolutely suffocating levels of student loan debt, many of these young adults are putting off purchasing a home indefinitely.  The following is an excerpt from a recent CNN article about this phenomenon...

The Millennial generation is great at many things: texting, social media, selfies. But buying a home? Not so much.


Just 36% of Americans under the age of 35 own a home, according to the Census Bureau. That’s down from 42% in 2007 and the lowest level since 1982, when the agency began tracking homeownership by age.


It’s not all their fault. Millennials want to buy homes — 90% prefer owning over renting, according to a recent survey from Fannie Mae.

But student loan debt, tight lending standards and stiff competition have made it next to impossible for many of these younger Americans to make the leap.

This is one of the primary reasons why homeownership in America is declining.

A lot of young adults would love to buy a home, but they are already financially crippled from the very start of their adult lives by student loan debt.  In fact, the total amount of student loan debt is now up to approximately 1.1 trillion dollars.  That is even more than the total amount of credit card debt in this country.

We live in a debt-based system which is incredibly fragile.

We experienced this firsthand during the last financial crisis.

But we just can't help ourselves.

We have always got to have more, and society teaches us that if we don't have enough money to pay for it that we should just go into even more debt.

Unfortunately, just as so many individuals and families have found out in recent years, eventually a day of reckoning arrives.

And a day of reckoning is coming for the nation as a whole at some point as well.

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I MISS KUDLOW's picture

and nobody owns anything, i guess it will take 160 years to unwind

Dr. Engali's picture

No, once the great unwind really kicks in high gear it will be very quick.

max2205's picture

Go large rates will never be this low again....right


Can't buy overpriced stawks on a death trap from GM...recall is our middle name

DoChenRollingBearing's picture



The Central Bank of DoChenRollingBearing has an insatiable demand for the below hard assets:

1) Au

2) Pt

3) Pd

4) Bitcoin

5) Highly engineered products made of 52100 steel

6) Maybe a little more Pb

zaphod's picture

This is a great list. What do you plan to do with #5 though, that stuff is a bit beyond a home forge I thought.

Yes_Questions's picture



It'll be interesting to see who brings up BK reforms in this election cycle during his/her campaign, and if any of the sheep lift their snouts to listen.


Unless, the Great Unwind will somehow translate into better pay for the JOB DOERS, the system needs to relax the rules on BK (debt discharge of all kinds for humans) or we may instead get to see a Great UNGLUED and for that, there is Master Card.





Seasmoke's picture

Keeping up with The Jones' got very very hard to do !!

Oldwood's picture

There is no reason for people to pull back on credit. They see the whole world as immune to risk. The stock market is to the moon and no one has fear of accountability for anything. In an attempt to keep this thing afloat the have destroyed what little remaining morality we had left.

We are all in it for ourselves now. No illusion of the common good or for the sake of our country. Its all about me now brother. Run up the credit cards and party like there is no tomorrow, cause no one thinks there is.

Dr. Engali's picture

So, what's your point? It's old news and it won't change until the system collapses. Then after a time, it will start all over again with a different set of players.

fonzannoon's picture

If by "America" he means wealthy Asian and Saudi and Russian money pouring in buying huge homes, then yes, American's are buying bigger homes than ever.

Cugel's picture

I wish that was true, but based on my day-to-day experience with Americans they are fully complicit in this.

If the were going to switch to borrow-to-consume from produce-to-save in a generation, why did it have to be my generation?

NoDebt's picture

Nobody's building small homes any more.  No money in it.  Only the bigger ones are going up in value.  

If I get a chance I'll shoot you a pic of the CASTLE some guy is building literally around the corner from my place.  Your eyes will fall out.  Mine did.  The 5-10,000 SF McMansions they put up in a neighborhood behind me back in the real estate boom weren't big enough, apparently.  No, this dude needed an 18,000 SF house.  That includes the servants quarters, of course, which themselves are much bigger than my own house.

My house is a 50 year old, 1300 SF rancher and his house is a long Par 3 from my place.

This is getting a little crazy, and I'm fairly accustomed to crazy.

Yes_Questions's picture



WOW, big servants!


inflation is hitting the bottom line in the least expected ways..these....days.


fonzannoon's picture

I think we are missing one area that has been one of the best investments going and probably still has a bright future

RafterManFMJ's picture

I've idly wondered how effective it would be to stack trailers into a big cube and rent them out; central sewage and water - savings!

Less land needed as well.

Of course you'd have built a tornado magnet; it'd likely get hit 2 or 3 times a season.

SmackDaddy's picture

I can picture the sign now... Heli-crate Tower Acres

SmackDaddy's picture

Fucking-a.  Theyre building $600k homes (central Ohio) practically under high tension power lines near me.  An trendy aparment complex in an industrial area.  I mean, who finances this shit? 

cynicalskeptic's picture

Who LIVES in this shit?   morons......  

They put up an apartment complex in what used to be the old 'gasoline alley' neighborhood in the town I grew up in... Gas stations, Auto Body Shops, repair shops and a few junk yards - all viable and long time businesses.  Most were forced out but a few that owned their buildings wouldn't sell and stayed.   Now the new residents are bitching about the smells from the paint and noise from the repair shop..... WTF?  

We destroy viable businesses so fools can build unneeded and unwanted projects in places they shouldn't be.....

Same crap going on in Queens near Shea ----oops....'Citi Field' - businesses that they didn't WANT anywhere else being forced out (of business) to benefit connected developers that want to grab the land oto build more of the same old crap which is NOT needed.

cape_royds's picture

Because of the debt-fuelled real estate boom, which in Canada has not yet corrected, the entire City of Vancouver is getting slowly transformed into a massive bedroom community. A real estate developer even tried to buy up the Port of Vancouver to try to turn it into condos. The universities here are tearing down classrooms and laboratories so that they can build more condos to sell.

You can't make this shit up. If Juvenal showed up today, he'd either jump off a bridge, or go postal. But there's no way that poor bastard would be able to write satire.

Wile-E-Coyote's picture

Yeap the other day I drove through an industrial estate to find at the end of the road a plush complex of apartments, the context was astounding, I asked myself who the fuck would want to live there, when the only access was a drive through a really shitty industrial area. I actually caught myself saying WTF.

Dead Man Walking's picture

My house is a 50 year old, 1300 SF rancher and his house is a long Par 3 from my place.

This is getting a little crazy, and I'm fairly accustomed to crazy.....


NoDebt, this one is easy.  Put a red metal flag in your front yard, and your house can be their mailbox !

alexcojones's picture

Go Big or Go Home, right America?

The bigger the castle, the harder to protect, when TSHTF.

GooseShtepping Moron's picture

That chart would seem to validate my subjective assessment that 1993-94 was the beginning of New Wave Bobo Consumerism and that it radically altered our society.

SmackDaddy's picture

you're right.  but you're making people our age sound like fags.  

you must set the example.  demonstate there is an alternative.  

a lot of people around here talk like they are better than everyone.  those people seem like they are detached from reality and dont really have influence over anyone in their lives.  

each and every day, people never cease to amaze me.  both good and bad.  and sometimes its hard to predict the ones who are going to step up in face of real adversity....

Yen Cross's picture

 I'm searching for another country.

Moe Hamhead's picture

Try Texas.  No income tax, easy to get to and from (2 airports), and not far from the tropics or the mountains, or the left coast.

Oldwood's picture

Yes, but we have no more control of our borders and immigration policy than anywhere else. Demographics and therefore our laws, will change.

ricky663's picture

We are in Thailand, and quite happy.
Despite the current political situation, we live in a beautiful place with a wonderful culture... Low cost of living.
Highly recommended... Check it out!

RafterManFMJ's picture

You know, if I bought a couple more apts. and handed off management to a local specialist we probably COULD exfiltrate to Thailand or some such place.

Something to keep in mind... A "plan B" if you will.

DerdyBulls's picture

Yes. I get misty eyed for Bangkok when I think about military coups and tsunamis. 

yogibear's picture

Introduce 250% LTV home loans with no money down and no documentation Yellen, Evans and Dudley! Let's take this bubble to new levels.

The Federal Reserve is good at one thing, creating larger and larger bubbles each time.

Seek_Truth's picture

For everything in the world--the lust of the flesh, the lust of the eyes, and the pride of life--comes not from the Father but from the world. - 1 John 2:16

Oldwood's picture

The best trick the devil ever played was convincing man he did not exist.

Yet, when things go to shit, who is it we are first to blame? The devil made me do it?

buzzsaw99's picture

half those nice cars are leases. lololololol

cowdiddly's picture

I don't know. I see people here with 1 Kid building 6-7 bedroom 4.5 baths for 3 people to live in. These are not people effuent enough to have maids and butlers to keep these things clean. I have to pay to heat and cool my house and even if I was a billionare I would not want more than maybe 2400 sq ft to maintain for just me and the wife and an ocasional visit from the kids. Maybe a 10,000 sqare shop or something. I think insanity has taken over this country.

 my meager 2000 squares here and dont want an add on. If anything I would like to downsize.

Seek_Truth's picture

These are not people effluent enough?

What, they don't discharge enough waste?

Perhaps you meant "affluent"?

cowdiddly's picture

Sorry guy, typo. But yes, I think the first term was  fitting if not freudian.

Seek_Truth's picture

Yes, Freudian, indeed!

Of course Freud was full of effluence, so actually Freudian squared!

cowdiddly's picture

Yea, to paraphrase, I never wanted to fuck my mother or kill my dad, so yes he was like most of acadamia: FOS2

RafterManFMJ's picture

You didn't? Well I guess we know you're not a lawyer or bankster then?

Platinum's picture

While everybody is going to eat it when the SHTF, the foolish people buying giant homes (and the accompanying crap to fill it with), are going to suffer the most psychologically, since they had the illusion of success.


In some ways, it will be interesting to see how everybody we know (or thought we did) handles what is just about here.


Maybe it is just me, but I'm seeing more and more glitches in the matrix.

George Carlin had a great bit on this.

Joebloinvestor's picture

I hope they tax the shit out of them.

Seek_Truth's picture

No need for hope, rest assured they will.

Oldwood's picture

They will but you will still be fucked.

SmackDaddy's picture

the get the fuck out of here you statist fuck.  

Oldwood's picture

too easy to categorize. their are trailer park people who will be on the street in their pajamas. The key is preparedness, regardless of wealth or position. I live in an oversize home on a oversize acreage and I'm not particularly wealthy, just frugal. Trust me, I'm prepared. Its never safe to assume to much.

Seek_Truth's picture

The key is to never assume you're prepared.

Oldwood's picture

I have had friends ask how to prepare and I have suggestions but primarily I suggest that they become mentally prepared. We have no way to know exactly what will happen or when, but preparedness is mostly the ability to act in crisis. Have thought out reactions to as many different potentials as possible. This can make you appear insane to others, but that might be part of my plan!