{"id":78725,"date":"2023-05-27T01:15:28","date_gmt":"2023-05-27T08:15:28","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=78725"},"modified":"2023-05-30T06:45:56","modified_gmt":"2023-05-30T13:45:56","slug":"black-coffee-27-may-2023","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id78725-black-coffee-27-may-2023.html","title":{"rendered":"Black Coffee: Tick Tock Goes the Debt Clock"},"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 a wonderful week. And with that, let’s get right to this week’s commentary, shall we?<\/p>\n

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If Dr. Copper has a PhD in economics, and is an expert on the business cycle, then gold is a professor with a Nobel Prize in monetary debasement. <\/em><\/div>\n<\/blockquote>\n
– Charlie Morris<\/strong><\/div>\n
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Either the State ends public debt, or public debt will end the State. <\/em><\/div>\n<\/blockquote>\n
– David Hume<\/strong><\/div>\n

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

Debit: <\/strong><\/span>Did you see this? The 30-year mortgage rate is 6.90%, with the average lender now offering their highest rates<\/a> since early March. If this doesn’t change, the pressure on the housing market will continue into summer, as buyers are struggle to afford homes because prices haven’t declined enough to make up for those rising mortgage rates. Adding salt to the wound is a very stoic Fed, which continues to insist that they have no plans to lower interest rates any time soon. And we all<\/strong><\/em> know that the Fed doesn’t just talk the talk – it walks the walk too. Oh, wait …<\/p>\n

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(h\/t: @MishGEA)<\/p><\/div>\n

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(h\/t: r\/WallStreetSilver u\/silverpatriot7)<\/p><\/div>\n

Debit: <\/strong><\/span>For what it’s worth, three years ago, the 30-year mortgage rate was 3.24% and the median US home price was $284,000. Today, the 30-year mortgage rate is 6.39% and the median US home price is $389,000. As a result, the average down payment<\/a> is now $21,000 for those who put 20% down, and the average monthly payment has increased from $987 to $1944. The good news is, there’s a cure for that. Well … even if it is<\/strong><\/em> only temporary:<\/p>\n

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Debit: <\/strong><\/span>Needless to say, those rising monthly mortgage payments are resulting in higher debt-to-income<\/a> (DTI) ratios for today’s homebuyers. Before the turn of the century, lenders recommended a DTI of no more than 33%. That figure rose to 40% during the housing bubble run-up that led to the Great Financial Crisis (GFC) in 2008. Today, those same lenders consider a good debt-to-income ratio to be 43% or less – although DTIs as high as 50% are sometimes acceptable depending on the loan. Because it’s all about closing that loan deal.<\/p>\n

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Debit: <\/strong><\/span>Not surprisingly, rising DTIs have increased the popularity<\/a> of high-risk adjustable rate mortgages (ARMs); they’ve climbed from 2% of all mortgages two years ago to 13% today. Oh, and speaking of high risk …<\/p>\n