{"id":77434,"date":"2023-03-11T01:15:35","date_gmt":"2023-03-11T09:15:35","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=77434"},"modified":"2023-05-12T11:35:13","modified_gmt":"2023-05-12T18:35:13","slug":"black-coffee-11-mar-2023","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id77434-black-coffee-11-mar-2023.html","title":{"rendered":"Black Coffee: Banking on the Future"},"content":{"rendered":"

\"\"It’s time to sit back, relax and enjoy a little joe …<\/em><\/p>\n

Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.<\/p>\n

I hope everybody had an enjoyable week. Without further ado, let’s get right to this week’s commentary …<\/p>\n

If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.<\/em><\/p><\/blockquote>\n

– John Paul Getty<\/strong><\/p>\n

The future ain’t what it used to be.<\/em><\/p><\/blockquote>\n

– Yogi Berra<\/strong><\/p>\n

Credits and Debits<\/strong><\/p>\n

Credit:<\/strong><\/span> Did you see this? A recent study has found that 72% of Gen Zers – that is, those currently between 12 and 26 – believe they’ll become wealthy<\/a> one day, making them the most financially optimistic generation. Hey … who says the American Dream is dead and buried? After all, it could be worse. For example, the average German’s standard of living has been in decline for a couple of years now. Then again, It’s hard to see how Germany is much different from America these days.<\/p>\n

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Debit:<\/strong><\/span> Frankly, it’s good for everyone<\/strong><\/em> that the latest generation of Americans is so positive about their future finances. And let’s pray that their hopes and dreams come to fruition because – as of right now – the ones who are looking to buy their first home should know that tight inventory and uncomfortably high interest rates mean that the American dream can only be achieved<\/a> by those with high-paying jobs, lots of money, or rich parents. No doubt that’s why the median age of first-time home buyers has jumped from 29 in 1981 to 36 today.<\/p>\n

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Debit:<\/strong><\/span> Unfortunately, affordability for first-time home buyers has been diminishing for a long time – but especially over the past ten years or so. Even before the pandemic, roughly 1 in 3 first-time homebuyers could only cover at least part of their down payment by tapping rich parents<\/a> or family members for either a gift or loan. By 2021, that increased to 2 in 5, with the percentage of young adult buyers with a co-borrower over the age of 55 also at an all-time high.<\/p>\n

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Debit:<\/strong><\/span> Then again, as Bloomberg<\/em> pointed out this week, during the pandemic housing boom, “first-time homebuyers were frequently squeezed out as they competed against people with cash and investors who frequently target starter homes.” In fact, by 2022 the typical household income for first-time buyers soared to $90,000 in 2022<\/a>; nearly 30% higher than the income required\u00a0 in 2019. And that’s a problem considering the median household income is currently in the neighborhood of $71,000.<\/p>\n

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Debit:<\/strong><\/span> But wait; the bad news for prospective first-time home buyers gets worse. The affordability problem is so bad<\/a> that – for those without<\/strong><\/em> wealthy parents – it now takes roughly 13 years<\/strong><\/em> for an individual saving 5% of the median household income every month to set aside enough for a 10% down payment on a typical home. And that’s<\/strong><\/em> assuming home prices don’t increase any higher than they already are over the next decade. I know …<\/p>\n

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Credit:<\/strong><\/span> Generation Z’s optimism is based on their plan to become wealthy via the stock market<\/a>. But as financial analyst Lance Roberts points out, “that hasn’t worked for the generations before them.” That’s because since 1980, there have been three major bull market cycles – each culminating in major bubbles. The first two – the Dot-com bust of 2000 and the Real Estate Bubble collapse in 2008 – ended in tears. As for the third, Roberts says, “We now have the Everything Bubble fueled by a decade of monetary interventions. Yet, 80% of Americans still aren’t wealthy.” Uh huh. Just think how high that number will be when this one pops.<\/p>\n

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Debit:<\/strong><\/span> Needless to say, homes don’t have a monopoly on affordability issues; the Manheim Used Vehicle Value Index, which tracks the auction prices of used cars, increased 4.3% last month. That’s the largest February increase<\/a> since 2009. Although used car prices are down from record highs last year of more than $28,000, the average price of a used vehicle has clawed its way back up to $26,510. As a result, used vehicle retail sales declined 5% in February, and are down 9% since January 2022. And if you think rising prices for used<\/strong><\/em> cars doesn’t make a lot of sense, then you probably haven’t seen this …<\/p>\n