It’s true that interest rates have been a challenge in the auto market lately. With rates steadily increasing and loans becoming more difficult to obtain, car buyers have faced obstacles in financing their purchases. On average, term lengths for car loans have been reaching 72 months, while rates for new and used cars are around 7% and 10.5% respectively.
Despite these challenges, auto sales have been surprisingly robust, which is encouraging. It seems that even with higher rates, customers have been finding ways to make their purchases work. It’s worth noting that the Federal Reserve has indicated a possible shift in their approach to rising costs. They may pause or even reverse their series of rate hikes, which could stabilize rates in the latter half of this year and potentially lead to a decrease in 2024.
The Car Sales Industry in 2022 increased focus on branding and EV marketing. That combined with anticipated improvements in production this year, is looks like auto marketing is poised for growth in 2023. Experts predict that the automotive category will experience an increase in marketing spending for the first time in a few years.
Notably, commercials promoting EVs made up 24% of auto makers’ TV spending in 2022, up from 13.8% in 2021, indicating a greater emphasis on promoting electric vehicles. Kia, for example, continued its marketing spend in support of future demand, recognizing the ongoing transformation to EVs. They even utilized the Super Bowl to introduce their EV6, not for immediate high sales volume, but to establish themselves as a legitimate EV brand and generate interest in their forthcoming models like the EV9.
However, not all brands are adopting the same approach. Ford CEO Jim Farley, for instance, expressed skepticism about spending on traditional marketing, advocating for customer incentives and vehicle updates instead. Nevertheless, the focus on EVs has become more prominent, as automakers shift their advertising efforts towards vehicles that they want consumers to be aware of, given the decreased need for sales incentives.
Overall, with the importance placed on branding, the rise of EVs, and an anticipated rebound in production, the outlook for auto marketing in 2023 appears promising.
Personal and business bankruptcy filings rose 10 percent in the twelve-month period ending June 30, 2023, compared with the previous year.
Business filings rose 23.3 percent, from 12,748 to 15,724 in the year ending June 30, 2023. Non-business bankruptcy filings rose 9.5 percent to 403,000, compared with 367,886 in the previous year.
Click below to see a chart showing Jan 2023 Marketing Mail rates compared to the upcoming July 9 rate change.
2023-JAN 2023-JUL MARKETING MAIL COMPARISON
Below to review a chart of First-Class mail rates from Jan 2023 compared to the July 9th rate request.
2023-07-09 POSTAGE RATES BEBDATA
The USPS has recently filed for a second postal rate increase to take place on July 9th. Click below to see a proposed rate chart.
2023-07-09 POSTAGE RATES BEBDATA
TransUnion forecasts serious credit card delinquencies to rise to 2.60% at the end of 2023 from 2.10% at the conclusion of 2022. Unsecured personal loan delinquency rates are expected to increase from 4.10% to 4.30% in the same timeframe. Serious auto loan delinquency rates are expected to modestly decline to 1.90% in 2023 from 1.95% in 2022.
TransUnion’s forecasts are based on various economic assumptions, such as expected consumer spending, disposable personal income, home prices, inflation, interest rates, real GDP growth rates and unemployment rates, among other metrics. The forecasts could change if there are unanticipated shocks to the economy, such as if COVID-19 disrupts recovery efforts, home prices unexpectedly fall or inflation continues to remain elevated through the next year. Better-than-expected improvements in the economy, such as potential increases in GDP and disposable income, could also impact these forecasts.
After two years of credit card and personal loan growth, despite serious delinquency rates that remained near pre-COVID levels, TransUnion predicts the consumer credit market will experience pronounced changes in 2023. TransUnion’s 2023 Consumer Credit Forecast projects delinquency rates for credit card and personal loans to rise to levels not seen since 2010. At the same time, demand for most lending products will remain high relative to pre-pandemic levels with the number of consumers securing auto and home equity loans increasing on an annual basis.
Despite a challenging macroeconomic environment, TransUnion’s new Consumer Pulse study found that more than half (52%) of Americans are optimistic about their financial future during the next 12 months. The youngest generations – Millennials (64%) and Gen Z (61%) – are most optimistic. The optimism levels are occurring against a backdrop wherein 82% of consumers believe the U.S. is currently in or will be in a recession before the end of 2023.
Rapidly increasing interest rates and stubbornly high inflation combined with recession fears represent the latest in a series of significant challenges consumers have faced in recent years. It’s not surprising then to see pronounced increases in delinquency rates for credit card and personal loans, two of the more popular credit products. Yet, many consumers – from a credit perspective – are in a better position than they were just a few years ago, equipped with credit they can use in case of more macroeconomic challenges. We expect demand for credit to continue to be high with lenders positioned well to meet it. While unemployment is likely to rise next year, it should remain relatively low, a key element for a healthy consumer credit market.
Marketers anticipate a period of adjustment in 2023 for used car sales. Affordability due to higher interest rates and inventory challenges point to an anticipated slight decrease in sales.
Marketers forecast 18.9 million in retail used car sales for 2023 and 35.6 million for overall used sales.
Used car sales were down in 2022, with the rolling 30-day retails sales 9% behind 2021. The average listing price also saw a 4% decrease to $27,077.
By end of 2022, the used market saw a double-digit drop in vehicles priced between $25,000 and $30,000 and a near 10% drop in vehicles between $20,000 and $25,000. There has been a steady growth in wholesale inventory over the past six months.
However, as prices retreat for used vehicles from record highs, affordability remains an issue, with high interest rates, 12%-13%. Rates are expected to climb, as the Federal Reserve tries to bring down inflation. The Fed in the past year has raised rates 425 basis points — the highest annual adjustment on record. The rising rates have dramatically impacted the subprime market. But the higher interest rates and costs have caused demand to slide throughout the industry.
The industry is trading a supply problem for a demand problem. With higher expenses comes lower demand.
Interest rates are not expected to decrease though hikes are expected to slow during the 3rd and 4th quarter.
Certified preowned vehicles (CPP) are expected to remain in short supply. Vehicles usually available for the CPO market were entering the rental car market at a higher rate throughout 2021 and 2022. CPO sales are expected to be around 2.2 million this year.
RESOURCE: National Independent Auto Dealers Association
National housing market indicators available as of January showed activity in housing markets was mixed. Trends in some of the top indicators for this month include:
- Purchases of new homes increased in December for a third
consecutive month. New single-family home sales rose 2.3 percent
to 616,000 units (SAAR) in December from a pace of 602,000 in
November but were 26.6 percent lower year-over-year (y/y). Note
that monthly data on new home sales tend to be volatile. For all of
2022, new home sales reached 644,000, down 16.5 percent from
771,000 in 2021 and their slowest pace since 2018. (Sources: HUD
and Census Bureau)
- Existing home sales fell for the eleventh consecutive month to their
slowest pace since November 2010. The National Association of
REALTORS® (NAR) reported that December sales of existing homes
(including single-family homes, townhomes, condominiums, and
cooperatives) slipped 1.5 percent to 4.02 million units (SAAR) from a
pace of 4.08 million in November and were 34 percent lower y/y. For
all of 2022, existing home sales dropped 17.8 percent to 5.03 million
units from 6.12 million in 2021 and the slowest pace since 2014.
Because existing home sales are based on a closing, December sales
reflect contract signings in October and November. Mortgage rates
have trended down since September, and month-to-month (m/m)
house prices have remained the same or declined in the past several
months—all of which should help to improve demand. Inventories
of existing homes are still lean, however.
- New construction of single-family homes rose to their highest level
since August. Single-family housing starts increased 11.3 percent to
909,000 units (SAAR) in December from a revised pace of 817,000
units in November but were 25 percent lower y/y. Multifamily
housing starts (5+ units in a structure), at 463,000 units (SAAR),
fell 18.9 percent m/m and were 16.3 percent lower y/y. Note that
m/m changes in multifamily starts are often volatile. Residential
construction employment was up 3.2 percent y/y; residential
construction costs were down 1.2 percent in December but up 6.9
percent y/y. For all of 2022, total construction of new homes reached
1.553 million units, 3.0 percent lower than in 2021 (1.601 million
units and the strongest pace since 2006). New construction of singlefamily homes fell 10.6 percent, while starts on multifamily homes
rose 14.5 percent in 2022. (Sources: HUD, Census Bureau and BLS)
- Annual house price appreciation continued to decelerate in
November, with annual gains ranging from 6.8 to 8.2 percent.
The Federal Housing Finance Agency (FHFA) seasonally adjusted
purchase-only house price index for November estimated that home
values were down 0.1 percent m/m and rose 8.2 percent y/y, down
from an annual gain of 9.8 percent in October. The non-seasonally
adjusted CoreLogic Case-Shiller® 20-City Home Price Index, posted
a 0.8 percent m/m decline in home values in November and a
6.8 percent y/y increase, down from an 8.6-percent annual gain in
October. Mortgage financing has become more expensive as the
Federal Reserve raises interest rates, a process that began in April.
The annual growth rate of house prices peaked in the spring of 2022
and may well continue to decelerate. The home price data for both
indices are based on real estate sales contracts signed in September
and October with subsequent closings during November. (Both price
indices are released with a 2-month lag.)
- The inventory of homes for sale remained the same for new homes
but fell for existing homes. The listed inventory of new homes for
sale, at 461,000 units at the end of December, was unchanged m/m
but was 18.5 percent higher y/y. That inventory would support 9.0
months of sales at the current sales pace, down from 9.2 months in
November due to an increase in sales. Available existing homes for
sale, at 970,000 units in December, declined 13.4 percent m/m but
were 10.2 percent higher y/y. That inventory represents a 2.9-month
supply, down from 3.3 months in November. The long-term average
for months’ supply of homes on the market is 6.0 months.
- The U.S. homeownership rate fell slightly in the fourth quarter.
The national homeownership rate decreased to 65.9 percent in the
fourth quarter of 2022 from 66.0 percent the previous quarter but
was up from 65.5 percent a year ago. The historic norm since 1965
is 65.2 percent. (Source: Census Bureau)
- Forbearance on mortgage loans remained the same. The MBA
Forbearance Survey shows the share of homeowners with mortgages
in forbearance was 0.70 percent (351,000 households) in December,
the same as in the previous month, but down from 1.41 percent
(705,000 households) one year ago. The forbearance rate was only
0.25 percent of all home loans in the beginning of March 2020,
before the economic effects of the COVID pandemic began to be felt.
- Housing insecurity due to the pandemic remains elevated but
has improved. HUD analysis of the Census Household Pulse Survey
(Week 53: January 4-16, 2022) shows that approximately 11.4
percent, or 5.25 million, renter households were behind on rental
payments, an improvement over 15.1 percent, or 6.96 million,
households one year ago. An estimated 4.6 percent, or 2.13 million,
renter households feared eviction was imminent in the next
two months, down from 7.1 percent or 3.17 million a year ago.
Under Treasury’s Emergency Rental Assistance (ERA) program, an
estimated 2.84 million renters have applied for and received rental
assistance. Approximately 5.57 percent, or 4.59 million, homeowner
households were behind on their mortgage payments in January, an
improvement over 6.66 percent, or 5.50 million in January of 2021.
An estimated 1.12 percent, or 890,000 homeowners, feared
foreclosure was imminent in the next two months.
- The 30-year fixed-rate mortgage (FRM) continued to ease, reaching
its lowest level since September. The 30-year FRM reached an
average weekly low in January of 6.13 percent the week ending
January 26, 2023, down from the weekly low in December of 6.27
percent and the lowest average weekly rate since last September
(6.02 percent). The highest average weekly rate during that time
frame was 7.08 percent in October and November. The mortgage
rate was 3.55 percent one year ago. (Source: Freddie Mac)