The Link Between Car Ownership and Home Ownership

Most real estate agents spend a good portion of their time looking at trends that may be indicators of the housing market in the country and more specifically, where they work. But, those trends and stats, while accurate, can sometimes be misleading or not entirely useful. Therefore, you sometimes have to look elsewhere to get a better understanding of what’s going on. Many times, by looking at how the state of other industries are doing you can more easily draw some conclusions.

One area that seems to always coincide with the housing market in one way or another, is car ownership.

How Car Ownership and Home Ownership Go Hand in Hand

When the economy is doing well, in general, you’ll see a rise in not only homeownership and mortgage applications but also, car ownership. People who are able to afford homes in areas where they will need a car, usually take that into consideration when it comes time to budget for a home.

That’s because on top of your mortgage payment, a car payment takes up a major portion of what you need to pay every month. In many cases, these buyers probably own their car long before buying a home, and may even use this asset to some degree when applying for a mortgage.

Additionally, according to CityLab, “Owning a car means your life is likely to be more stable and your bank account more flush.” Certainly, there’s no doubt about that. That being said, it’s important to remember that these days, people are slowly finding ways to live without a car, either by moving into an area that has reliable public transportation, biking lanes or walkability, or by taking up a career them allows you to work from home.

But, what happens when you do own a car, life is suddenly not financially stable anymore, and you start to fall behind?

When People Start Falling Behind on Car Payments

Falling behind on any payment is never good news. If you’re lucky, you can catch up before the late fees and interest piles up.

But, when people start to fall behind on all of their payments, it’s difficult to decide which loan is worth tackling first. While we’d tend to think that people would prioritize their mortgage loan over everything else, CityLab stated that people are so reliant on their cars, that they try to pay that loan off before everything else. This means that even if car loan payment numbers are looking good, the housing market and the economy overall, can still be very bad.

Of course, there are other factors that come into play as well. Many times, people do not realize that they’re being taken advantage of when they’re offered a car loan. These loans – subprime auto loans – aren’t all that different from subprime mortgage loans. Though these loans generally take advantage of people with low credit scores and who come from low-income populations, failure to pay them may not always be indicative of failure to pay a mortgage as well, but, it usually is.

Other Indicators of a Decline in Home Ownership

If someone does lose their car, it doesn’t always mean that they’ll lose their house, too. However, it’s important to look at these kinds of trends and see how they do relate, what the connection is, and how reliable all that information is when considering the state of the housing market and the economy.

It’s not just car loans and car ownership that share any bit of relationship to whether or not you’re going to make some good money this year. It’s also inflation, the rise of student loan debt, credit card debt, healthcare prices, taxes, etc. In general, Americans are increasingly having more debt overall and may prioritize their mortgage payments for the first time, unlike how they did in the past.

Sometimes, the connection between these factors and homeownership is undeniable, whereas other times, you need to dig a little bit deeper to see what’s really going on.