Times have changed

I sometimes wonder whether I’ve become an old fart. Why else would I cringe when I read in the Wall Street Journal that about two-thirds of mortgages issued in the last half of 2004 were either adjustable rate (46%) or interest-only (17%) mortgages? Were Catherine and I fools when we put 20% down and took on a twenty-five year mortgage on the houses we’ve bought?

Or, are the people who take out these ‘new’ mortgages running a risk that we never wanted to take: that the housing market will continue to be hot for as long as they live in the house? Or, do these people feel entitled to buy a house that, in my opinion, they really can’t afford? In California 61% of the mortgages issued in the first two months of this year were interest-only mortgages. Yet it is estimated that only 18% of Californians can afford to buy an average house using the old 30-year fixed rate mortgage.

The question of entitlement is underlined by another Wall Street Journal article. Here are some numbers that should make you gag:

In 1990, household median income was just under $40,000. Now, it’s just over $40,000. In 1990, median household spending was just under $40,000. Now, it’s around $45,000. In 1990, median household debt was around $59,000. Now it’s slightly more than $100,000. Perhaps, the citizens have taken a lesson from our government: borrow, borrow, borrow. Live today, tomorrow may never come.