One in 4 middle-income new homeowners — twice as many as a decade before — are buying into cost-burdened situations.
The share of middle-class Americans who are buying wallet-squeezing homes has more than doubled in the previous 10 years.
Almost 30% of middle-class homeowners bought homes with monthly payments costing more than 30% of their income in 2022, an NBC News analysis of Census Bureau data found. That’s more than twice the share from 2013, with experts warning it leaves many households with less money for groceries and emergencies and less able to get ahead in the future.
That “cost-burdened” benchmark — in which a household devotes over 30% of income to housing costs — is a widely used measure of affordability for both homeownership and renting. The Census Bureau measures housing costs against it, and the Department of Housing and Urban Development has used it for decades.
Because renting a home that’s barely enough to get by is even more expensive and will go up faster than inflation, so if you’re lucky you buy a house that’s barely enough to get by and wait for the day when it’s finally affordable since the payments don’t increase as much as inflation.
That’s because to get the actual value of a home in 2024 you have to cut its price in half.
Buckle up, here we go again!
At least you roughly lock in a monthly rate. I was happy to not have 15% rent increases each year.
When buying our first house in 2008 the mortgage company was pushing us to buy more by saying, “why are you purchasing this house at $197,000 when you can afford twice that?” My response was, “we’ve done the math, we can’t afford twice as much.” Never listen to a mortgage broker. They all want you to spend more so they make more.
The amount I “qualified for” when applying for a mortgage was fucking insane. I would be completely under water if I had taken the bank up on that full amount. I assume plenty of people jump at the chance to spend huge piles of money they don’t have and will likely never have.
I bought in 2022 and can’t imagine having that much interaction with a mortgage broker. My interaction consisted of giving them my information. Getting pre approved for a stupidly large mortgage (about twice what I could afford). Then, when I found a place to buy, they punched in the address for the “virtual appraisal” and approved the loan.
I had the exact same experience a few years ago. A lender did some quick math within like 20 minutes of talking and was like “I think we could go ahead and lock you in at loan in the mid 600’s”
Lmao we could never in a million years dream of affording that. Idk wtf that dude was thinking but I can’t even begin to try and figure out how I’d be able to afford that mortgage unless it was like a 3,000 year 1.08% loan or something.
Exactly this. I have pretty much the same exact story from that same time frame! Now my house is paid off, so I’m glad they didn’t tempt me.
Every home I can afford is a home I can barely afford, for both rent and mortgage.
Alternative headline: “Homes buyers can comfortably afford increasingly rare.”
Seriously, what a fucking disgusting headline… It reads as if the people are being irresponsible and buying things larger than they should…
Way to blame the people for an issue that isn’t their fault…
Well, the thing is, this is exactly what led to the housing crash of '08. Back then it was because the banks were pushing people into it (and then selling the bundled loans as better rated than they were, where inside investors bet on the loans failing). If this is what’s happening now, it’s certainly because the banks are enabling it again. That would be insanely stupid of the banks after what happened in '08, but somehow we’ve gotten stuck in the stupidest timeline, so…
I have been house hunting for over a year. I don’t have crazy requirements…I want a 3 bedroom house with a sub basement (tornadoes) and a fenceable yard within an hour of work.
The average price for that around here is 425k. A house that needs major work might only go down to 300k.
Down payment on a 300k house is 60k. A 240k mortgage plus taxes and insurance is $2100/month. $2100 is 30% of $7000. That’s a $140k salary. The median income in my county is 78k.
I make above that, have 200k for a down payment, and am still struggling to find a place.
[Edit] fixed math
7k a month is 84k a year, not 200k. I bought my house with similar numbers (house price, down, and monthly mortgage) and while I earn higher than average, I’m nowhere close to 200k.
Might want to double check your math there. $2,100 is 30% of a gross $72,000 salary. That’s under your median income target.
You’re right, I estimated 40% to taxes/insurance/etc and jumped to typoed it to 240k (which I then changed to 200k+ because of the estimate)
But the point remains that making the median salary only affords you a house in terrible condition. If something is listed for anything less than 400k, it’s all but guaranteed that there’s major structural or mechanic work needing to be done…
And it’s not natural inflation - the houses listed for 450k today were 350-375k a year ago.
Down payment is not $60k. That’s only if you want to avoid PMI. That said, putting down less means several hundred more a month in payment.
Also, not sure how you are doing the math to get to a required $200k income. $7k/month is $84k/year. Even with taxes, that is a little over $100k.
It’s not necessarily several hundred more for PMI. Mine was around $50/mo until I had it removed a few months ago.
Are we talking gross or net income as the baseline? Before taxes, $7k a month is still under $100k annually.
Maybe you are having a hard time finding a home because you are bad at math.
$7000/mo (even assuming take-home pay after insurance and 401k infusions, NOT gross salary) is more like $150k, not $200k. And that is in a high tax state like CA. $200k with 30% taxes is $140k, which is over $11k/month.
$2100 a month for insurance? That might be more than my whole house payment. Paid pretty much nothing down on 175k in very late 2018 - house is apparently worth 350k now, but we’re trapped because I can’t/won’t afford to move. I’m 85 miles from the office, but I WFH and it looks like I might have to go in about once a year.Well that’s what I get for not wearing my glasses…
I read it as 2100 all in, tax and insurance.
Lol no prob. I’ve always paid my taxes/insurance through my loan account so I do not think of them as separate expenses
I do not make 240k/year and it’s looking like I’ll have to pay $2400/month for all 3.
I should’ve known just based on the insanity of that rate, but I think there are places in Florida that are that much or even more, so I guess that’s where my head was.
Well, yeah. We can’t afford rent either.
Should we suffer from rent we can’t afford or a house that might one day have some value?
And most of those willing to take on the additional risk will look back at their decision positively. Shit’s not getting any cheaper.
Boomers are all about to die off though. So housing inventory might increase in the near future. Though investors and corporations might just fill the demand gap…
When the options are rent you can barely afford or a mortgage you can barely afford ,the choice is obvious .
Then there’s the unlucky few like myself who are perpetually single and stuck in a state where I spend half my income on renting someone’s garage, but a house would be almost 80% of it…
I literally just hit an income level where I could start looking for a house and then fucking COVID ruined everything…
More importantly, can you lock in a mortgage payment that won’t change much, vs. a rent that may skyrocket in the next 6 months? And sometimes a mortgage can be less than rent (although there are other costs to be considered). In our situation we were very lucky to be able to leverage money and jump on a house before things got stupid, and if we hadn’t taken that jump I’m not sure where we’d be right now since rent prices got crazy while we’re now still paying a decent monthly price.
Rent, where someone else is held responsible for maintenance and plumbing/electrical work and landscaping? Maintenance ain’t cheap.
My landlord doesn’t fix shit
It can be, especially if you have steady tenants.
I know ex landlords of mine that barely had to pay out anything over the course of years, while they made 5 figures/year.
Even as a home owner, you can have a string of luck. I have relatives with 20 year old water heaters going strong.
My HVAC is 25 years old and going strong. Only quirks it has is the airflow sensor needs to be blown (haha) once in the winter. Only maintenance outside of the usual I’ve done is replace the fan capacitor.
My water heater is about 10 years old but one of the perks of my gas utility is a water heater warranty so when it comes time to replace or repair part of the cost will be covered.
Condos are a happy in-between, where the COA handles anything outside of your studs, including the roof and landscaping. My condo even has free water and the pipes and tank are maintained by the COA. Free heat too. All I need to worry about is the electrical.
That’s no different than paying for home maintenance as you’re just paying monthly into a pool of money to be used for repairs which is then handled by the condo board. This can also have drawbacks as that money can be mismanaged or wildly underfunded.
In Miami, they’ve passed a law saying all condo buildings need a structural inspections and repairs after a building collapsed recently. Many of these condo owners are getting massive 5 or 6 figure bills when structural damage is discovered. This is a really bad spot to be in since you likely can’t sell the condo if the new buyer discovers that they’ll need to fork over $100k on top of the purchase price and if you don’t have the money you can be foreclosed on by the COA.
That’s a very valid point. It’s crucial to do due diligence before buying into a condo, especially in an older building.
Yeah, but don’t kid yourself thinking that shit is free.
It’s a gamble, as long as your income remains steady and you don’t have any major expenses crop up, the gamble pays off.
There’s no guarantee that it will all turn out positive, though. That’s why they call it “risk”.
Those first few years will be the most vulnerable, as you are not paying down principal very fast. All it takes is a job loss combined with a modest short-term real estate downturn to end up underwater on their house but still needing to sell.
But if someone is able to buy in now, maintain stable employment, and keep paying that mortgage for 5 years or so, then they will likely be better off than if they had rented all that time. How many people here can say they are confident in their job security over the next 5 years, though?
most
You might be a bit optimistic there
I get it. My wife and I just bought a home in Canada this summer and the pressure is very real. The prices just keep climbing and there is so much competition for everything that comes up on the market. Throw in periodic drops in interest rates and you feel like you have to pounce now or you’ll never get one.
We were very fortunate that the sellers chose us specifically because of our family dynamic and the vacancy their own family was leaving in our little neighborhood of playing/communal children. We got the house at asking price and are well within our budget, but things were looking a bit grim there until fate worked itself out. People put shit-holes up for 400k and half the time people buy it anyway. If they don’t, the price drops by 15k and it’s sold the next day.
Around me it’s half the price monthly to rent than it is to buy. Probably even less when you factor in maintenance costs. But, every one has this idea that they NEED to buy a house. I think when people stop analyzing the numbers and just start doing things because everyone is doing it, it’s a sign we’re in some sort of bubble.
Yeah, it sucks, but honestly, this has been happening for a long time now. Way before current president, last one, one before that, and one before that. lol
People have always bought stuff they can barely afford.
When I bought my house, I waited until I could get something that wouldn’t take up more than 30% of my after-tax income. I found a small fixer-upper in a nice neighborhood, and everyone thought I was crazy for not getting something bigger.
Now my house is paid off, and they’re still stressing over their bigger, more expensive homes. Now to be honest, my house still kind of a piece of crap. Some rooms still have 1970’s wood paneling. No granite countertops for me. But fuck that noise, now that it’s paid off, I don’t owe anyone shit.
Times are tough, no doubt, but people make mistakes whether the economy is good or bad.
The whole point is that the rate of people doing that is increasing, meaning there’s likely something driving that uptick.
Like, if you saw the murder rate jump 20% year over year, “people have always done murder” doesn’t really explain that rise, y’know?
Edit: something, not someone
I imagine the answer is that it’s still cheaper than renting in those areas.
It is the American way.
Imaging sinking yourself completely just to follow the dream.
Imagine needing shelter to survive
Imagine needing shelter to be a legally recognized resident.
Imagine that there are alternatives to home ownership.
