I think that we need to go back 25 years and look at the financial/credit industry.
It used to be that you had to have a downpayment to buy a car. Now it’s the NINJA (no income, no job or assets) loans. It used to be that only business executive would lease cars. Now everyone does it.
It used to be that you need a downpayment to buy a house. Now you can can do NINJA 100% financing, interest only, option ARMS or negative amortization.
It used to be that teenagers had to work and save to buy stuff. Now they just apply for credit cards.
The lenders don’t want to do any real underwriting because it’s costly to staff those departments. They now rely on computer models and FICO scores to assign risk to certain borrowers and to figure out the interest rates to charge. but they forgot that with computer programs, it’s garbage-in , garbage-out.
Vendor financing used to be rare. Now sellers finance their customers so they don’t have to turn away anyone.
So long as buyers can make the minimum payment, they can afford their lifestyle. And the lenders can record increasing revenue on growing “assets” (now declining in value as borrowers are defaulting).
Growth fueled by credit can last for a while but eventually the music stops.
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I think that Californians are more into bling than East-Coasters or Mid-Westerners (except for New York and Florida).
