The struggle to keep essential assets is becoming increasingly real for many Americans. Just ask Karen LeSage, a 57-year-old single mother from East Hartford, Connecticut. For LeSage, her car isn’t a luxury; it’s a lifeline. She relies on it for crucial medical appointments to treat leg injuries and, most importantly, to pick up her teenage daughter from school, especially when seizures strike. “I have to go pick her up,” LeSage explains, highlighting the dire consequences of losing her vehicle: “I wouldn’t be able to do that.” Last year, the looming threat of car repossession became a harsh reality when LeSage fell behind on payments, a stark illustration of the financial tightrope many are walking. “For me, every penny counts and just to lose a couple of cents on gas is devastating sometimes,” she confesses, encapsulating the precarious financial situation of many households today.
LeSage’s story is not an isolated incident. Across the United States, a growing number of individuals are facing similar financial pressures as the nation’s economy shows signs of deceleration. Recent data from the U.S. Bureau of Economic Analysis confirms this trend, reporting a significant drop in gross domestic product to a mere 1.1% in the first quarter – the weakest growth in nine months. This economic slowdown is directly impacting personal finances, leading to a concerning rise in car repossessions and other indicators of financial distress.
Economic Slowdown Tightens Household Budgets
The pinch of a slowing economy is undeniably affecting American wallets. A recent Bankrate survey reveals that nearly half of U.S. adults, 49%, report having less savings than they did a year ago. Alarmingly, 10% of respondents admitted to having no savings cushion whatsoever. This lack of financial buffer makes households acutely vulnerable to economic headwinds, and the consequences are becoming visible in critical areas like auto repossessions and home foreclosures, both of which are starting to climb.
Margaret Rowe, a senior director at Fitch Ratings, points to the expiration of government stimulus measures and current economic challenges as key drivers behind this trend. “As a result of the expiration of government stimulus and current [economic] headwinds, we have seen delinquencies ticking up in this space over the last several months,” Rowe explains. This uptick in delinquencies is a precursor to more serious financial outcomes, including the repossession of essential assets like cars.
The Rise in Auto Loan Delinquencies
Fitch Ratings data further illustrates the concerning trend in auto loans. Delinquencies among subprime borrowers, those with less-than-perfect credit, have essentially returned to pre-pandemic levels, rebounding from the historic lows seen in the summer of 2021. This indicates that the financial relief experienced during the pandemic is waning, and previous vulnerabilities are resurfacing, leading to increased difficulty in keeping up with car payments and a potential rise in “are car repos increasing” as a direct consequence.
Home Foreclosures Mirror Auto Repossession Trends
The strain on household finances isn’t limited to auto loans. Home foreclosure filings are also exhibiting an upward trajectory, mirroring the concerning trend in car repossessions. Data from ATTOM, a property analytics firm, reveals that U.S. foreclosure filings reached a total of 95,712 in the first quarter of 2023. This represents a 6% increase from the previous quarter and a significant 22% jump compared to the same period last year.
Breaking down the data further, March alone saw 36,617 U.S. properties entering foreclosure, a 20% increase from February and 10% higher than March of the previous year. Notably, this marked the 23rd consecutive month of year-over-year increases in foreclosure activity, suggesting a sustained and growing challenge for homeowners.
Rob Barber, CEO of ATTOM, acknowledged in an email statement that part of the increase in foreclosure activity can be attributed to lenders processing a backlog that accumulated during the federal foreclosure moratorium implemented during the pandemic. This moratorium, which ended in July 2021, provided temporary relief, but its conclusion has unleashed a wave of deferred foreclosure actions. By the time the moratorium ended, an estimated 2 million homeowners had fallen behind on their mortgage payments due to job losses and other pandemic-related hardships.
Despite the rise, Barber points out that the increase in foreclosures has not been as drastic as some experts predicted. The strong economic rebound experienced during the pandemic, including a surge in home buying driven by low interest rates, provided a buffer for many homeowners. Furthermore, historically low unemployment rates have enabled some delinquent homeowners to catch up on their mortgage payments. Rising home prices over the past few years have also increased homeowner equity, giving them an incentive to resolve their loan delinquencies. ATTOM data indicates that 94% of homeowners with mortgages had equity in their properties in the last quarter of the previous year, with nearly half considered “equity-rich.”
“More income, more equity and lower payments set the stage for a more modest rise in foreclosures than predicted,” Barber concludes. However, he cautions that the outlook for the remainder of the year remains uncertain due to the evolving housing market, rising mortgage interest rates, and persistent inflation. “It’s likely that foreclosure filings will keep rising, but nothing like we saw back when the bubble burst in 2008,” Barber stated, referencing the severe financial crisis of 2008-2009.
Personal Accounts of Financial Strain
The statistics on car repos and foreclosures are brought to life by the personal stories of individuals facing these challenges. Rick Burrows, 61, from St. Charles, Missouri, was close to paying off his house loan when foreclosure proceedings began. Having lived in his home for over two decades, Burrows faced a devastating setback when he contracted Covid-19 in 2020, requiring hospitalization and oxygen support for months. This health crisis led to unemployment and a significant drop in his credit score. Adding to his financial woes, his car, essential for his work serving legal papers, was repossessed in 2021. “It seems like every time I turn around financially, just as I start to be able to get back on solid ground something else happens,” Burrows laments, highlighting the relentless nature of financial hardship for some. Still grappling with the long-term effects of Covid, Burrows experiences fatigue that impacts his work, and his fluctuating income, coupled with rising living costs and medical bills, makes it a constant struggle to stay afloat.
Taqwetta Crawley, 43, from Hampton, Connecticut, experienced the devastating reality of home foreclosure in January. Caught in a predatory loan, the pandemic further exacerbated her financial situation, leaving her unable to manage a mortgage that ballooned from $95,000 to $250,000. Now living with her sister, Crawley emphasizes the emotional toll and lack of compassion she encountered during her foreclosure ordeal. She now aims to educate others facing similar hardships, hoping to empower them with knowledge of available options and resources.
Seeking Available Help and Resources
Despite the grim statistics, resources are available to help homeowners navigate these challenging times. Sarah Bolling Mancini, a senior staff attorney at the National Consumer Law Center, points to the Homeowners Assistance Fund, a Covid-era support program, as a valuable resource. She advises homeowners to proactively communicate with their lenders or mortgage servicers, many of whom offer forbearance programs to provide temporary relief. “It’s important for consumers to reach out proactively,” Mancini stresses. Unfortunately, assistance for renters is more limited as pandemic-era programs have largely been exhausted.
Crawley emphasizes the need for empathy and understanding for those facing foreclosure and eviction. “I want people to understand that a foreclosure and eviction is not indicative of a person being untrustworthy, or a person that doesn’t deserve any sort of empathy or compassion,” she states. Burrows echoes this sentiment, wishing he had built a stronger financial cushion to weather unexpected storms. “I would have tried to save more money, or try to find a way to put money back where I could at least have a cushion to fall on,” he reflects.
In conclusion, “are car repos increasing” is not just a question but a reflection of a tangible trend in the current economic landscape. Coupled with rising home foreclosures, these indicators point to growing financial strain on households across the US. While the situation is concerning, resources and proactive communication with lenders can provide pathways to navigate these challenges. Understanding the available help and seeking it out is crucial for individuals and families striving for financial stability in an uncertain economic climate.
