Oh, how fast this has changed in a mere few months! Granted, I think this was coming for a while but the onset of reality- traditional financing and planning has organically shifted to be a whole new beast which we must all learn- is truly making me think of cars and houses in an entirely new way.

It may have been a Porsche dealer tapdancing the concept of “Buy a house, lease your car” a couple of weeks back to me (as a writer, not a buyer) over a beautiful Boxster leasing for $329 a month in a deserted, sparkling new showroom that made me start thinking about this old cliche. It probably didn’t help matters when several friends decided to put their homes on the market almost on an emergency schedule a few days later so they could sell and rent something before they ended upside down in their equity. (Same friends would never lease and drive cars that are paid for, by the way.)

Then I re-read an article in GQ magazine called “The American Dream, No Money Down” (Don’t ask why I have GQ in my house! That is not polite!) by Joel Lovell from February 2008 and I have to say that while this article raised my killer-mommy-nesting-hackles a year ago, I get what he was not only saying but predicting.

Is this problem really just geographic, as in those on the coasts are the only ones who really need to be concerned about falling housing values? How about stagnating housing prices combined with finance companies completely dropping financing or reducing potential customers to only “A” level credit (scores of 700 and above) only for cars? Or mortgage companies completely stopping all stated income which is refusing home finance to people who want to put 50% down on their homes, but because employers are increasingly turning employees into consultants, are unable to show 2 years of 1099 tax returns?

A lot of people are in a pickle or nearing the looming pickle of having to make these decisions.

Own, rent, house, car, bag it all and try corporate housing a la Grapes of Wrath with a dash of public transportation? Let me know what you think.

Robert and his wife have 5 kids ranging from 3 to 12 (aww! I always wanted my own basketball team!) and they are homeschooling them all. They have a Chevy Surburban for family trips and a Pontiac Vibe for Robert to go to his job. Now granted, they don’t have to shuttle 5 kids to school which saves their fuel consumption but the kids do have to do activities outside the home as part of their homeschooling compliance, eg, physical education, music lessons, etc. And, family outings cannot be done in the more fuel efficient Vibe so the Suburban gets used a lot.

Now Robert is one of those incredibly smart and quirky fellows so when his wife decided that the old family minivan wasn’t sexy enough to suit their family’s lifestyle image in 2006, Robert started keeping all of his gas receipts for the then new Suburban. Brace yourself! When Robert y familia bought the ‘burban, gas was $2.45 a gallon and it cost a mere $55 to fill up the tank. Flash forward to now and his tank last week was $4.11 and over $130 to fill up the tank.

So you might be saying to yourself “Yeh, so we are all adapting” but for the first half of this summer, what that meant for the Gonzalezes who can go through an 18 pack of eggs at breakfast time, everything gets affected and impacted. Now instead of days when they could do a nice outing all together, they have turned to attending free events in the parks. Robert and I both noticed that these kind of events are now overcrowded because gas prices are affecting everyone and that now, there is an increase in people just going to the malls, superstores and electronics stores just for entertainment, air conditioning and time outside the house. A recent and rare trip to Fry’s Electronics that I just made showed me just that: people lining up to play the Wii’s, XBox 360, watch the flat screen TV and no one in line actually making purchases.

Not a conspiracy theorist at all, Robert also noted that the increase in food costs that are supposedly the result of increased gas prices are, in his opinion, are the fuel companies giving commerce a reason to raise prices that people cannot question.

A veteran of both GM and Toyota, Robert also pointed out that the cars being made today are the cars that would have been okay 4 years ago. His family is sticking with its Suburban because it is functional, supports their lifestyle and with fuel costs dropping, he is hoping that they will be able to resume normal activities that they enjoy doing together. As for his Vibe, he said that if a new car doesn’t get at least 32 mpg, he wouldn’t even consider replacing it.

It seems that the idea that the recent fuel crunch would cause people to change their buying and driving habits isn’t as big as what was previously predicted. Although 50% of the cars sold in the US in June 2008 were 4-cylinders, the drive to keep filling the American dream for the sexy car that suits is continuing.

Michelle Naranjo

Originally posted here

A few years ago I decided that I wanted to buy a house. A little nest for my golden canary, Little Miss Motor Mouth, and I. Single mom (ex-husband lives a joyful life between France and the Amazon) with no income except what I make on my own, my parents were encouraging me to get something “of my own” rather than rent. The market was low, interest rates low and it was a good idea. So I fell in love online with a house in an area that was up and coming. The object of my obsession was this 1916 Sear’s Catalog House in a historic district that was like walking into the farmhouse from Field of Dreams. All sun and light and in the middle of an urban area. If you build it….

So here I was making decent money, owned my car, had no debt (no credit cards)…okay? Can we talk about credit scores? Guess what? It isn’t like the major credit reporting agencies think about Life Optimistic like I do which a life where everyone gets to start with 100 points and any lowering of the score is because they have done something wrong! They actually score you on what you owe! Start with zero and the more you owe the better your score is with some weird algorithms thrown in just to keep you confused. Weird. My broker tells me that my score is *okay* but “Hey! If you have a friend or family member that will cosign, you will get a better rate!”. Hrm. Family is out of state which means that they will not qualify me for a good rate because out of state financing means “vacation home” and that is a higher rate. Broker says, “Don’t you have a boyfriend?”. Well, yeh, and not that he was at marriage level but he has better credit than me (read: more debt) so I put him on the loan. I pay a significant down payment and closing costs and he contributes nothing. Woo hoo! Great rate so everyone lives happily ever after, right?

NO.

So, boyfriend doesn’t last (which is okay) but a few months after he isn’t around he calls and tells me that I have to sell the house (which had doubled in value) because he is on the title. Legal hell ensues. I feel like I bought a green card because I have to pay this loser to get off title. (I am skipping over years of legal bills here because I am still in denial but more about that cosign hell in a second.)

Meanwhile, my best friend needs a car. A way to get to work kind of car. I help him shop and after taking him by a dealership I used to work with we find his car. He doesn’t have any credit history because he is a musician but has a gotten a great job so when the sales guy says, “If you will cosign for him he will get a better deal”. Now who wouldn’t try to help their best friend? So I cosign. Sweet 2005 Mustang in yellow. He was one happy guy! They TOLD us that this would help him build credit.

Now after of the *helping a friend get a car* mode, my legal battles start getting resolved with the house but the conditions are that I have to refinance my house on my own, which all lawyers and brokers agree shouldn’t be a problem. But it was.

Turns out that even though I owned my cars (2 at this point) and had no debt and was making a good income, those crazy reporting agencies saw my debt to income ratio as being too high because actually, the cosigned car that my friend is paying for and insuring, is being reported as me being the primary on the loan! So getting a refi on the house was nearly impossible. Especially in the current lending market- getting a loan is hard.

What I learned is this: The real estate broker was no different than the car dealership. When they tell you that you will get a better rate it is because *they* will get a better rate and can mark up the points to you which makes them more money. They essentially get quotes that they then mark up- put more interest on- and that is how they all make money. That real estate broker was making a living and some would call it greedy. I didn’t understand to know differently and with the car I didn’t understand how they worked either.

Moral of the story is do not cosign because you will never know when you will need access to your own credit. I am lucky that my friend would never bilk on his payments on that car but if he did, my life would be difficult. Many a story has come past my desk of cosigning nightmares where friends and family have renegged on paying on co-signed cars.

Knowing that this has caused me hardship, my friend has volunteered to give me back the car so I can sell it but unlike these sales people, I made a commitment to my friend and would never screw anyone.

While part of that drop could be the pre-shocks of the REAL ID Act of 2005 sending tremors through the undocumented or illegal population, the rest can be attributed to the slumping housing market and the aftershocks among the legal skilled labor and construction workers.

Initially started as an effort to curb illegal immigration within the parameters of a larger national security act the REAL ID Act enforces that driver’s licenses be issued by Federal standards that would require a Social Security number in order to be issued a license. Several states have already adopted the policy and car dealers in those states have seen a very noticeable drop in sales to Hispanics.

From Used Car News:

Prior to 2007, North Carolina allowed residents with Mexican driver’s licenses to obtain state driver’s licenses. Now the state enforces a rule requiring a valid Social Security number for obtaining a driver’s license.

Jody Midgette, owner of Midgette Auto Sales in Harbinger, N.C., saw a huge effect on the dealership’s sales to Hispanics.

“Prior to the change, we used to do 15 percent to 20 percent of our business with Hispanics,” he said. “In 2007, we did less than 5 percent.”

Additionally, states that were having a burst in new home and commercial construction such as Arizona are beginning to feel the effects of the construction slump that has been long coming but fast-fueled by the sub-prime mortgage fiasco.

Again, from Used Car News:

Many Hispanic immigrants – both legal and illegal – work in the construction industry, he [Mauricio Espinosa, president and CEO of automotive consultancy G20 Inc.] said.

The downturn in homebuilding means less work, which limits vehicle purchases, especially pick-up trucks.

Mike Cunningham, owner of Payless Cars & Trucks in Tucson, Ariz., said a downturn in construction has chipped away at those values.

“Prices on truck merchandise are not what they were a year ago,” he said.

Cunningham said news in Arizona has centered on the drop in construction, which provided a lot of growth in the state in recent years.

All of this is a microcosm reflection of what is hitting the rest of the economy. In this case the car market is being affected greatly which in turn will affect other areas of the economy and vice versa.

Originally posted here