A Tale Of Two Credit Markets: New Auto Loans Highest In 9 Years As New Mortgages Slump Near Record Lows

Remember when three weeks ago, everyone was stunned as the Manufacturing ISM soared to new 3 year highs, continuing this summer's trend of blistering manufacturing, which was largely attributed to a burst of automotive production? Now, courtesy of the latest Q3 household credit report by the NY Fed, we know just how it was funded. According to the report, some $105 billion in new car loans were issued is the third quarter, the highest amount since 2005, and just $20 billion shy of an all time high.

That's the good news. The bad news as Equifax reported two months ago, new subprime loan origination is trending at about 31% and rising. And what's worst, is that recently both Moody's and Fitch joined forces in making up for their past oversights, and "slammed subprime auto bonds" suggesting this latest bout of subprime driven euphoria boosting the US manufacturing sector may not last. Or it very well may: after all the central banks are always on the lookout for new things to monetize.


But while US consumers just can't get enough of car loans, they are increasingly giving up on that other, levered purchase: mortgages. As the next chart shows, mortgage origination, while rebounding modestly from recent record lows, is still at levels that otherwise would suggest a broad economic recession.

Perhaps when all else fails, US households can just live out of their financed cars.

Source: NY Fed