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.
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.
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.
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 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.
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?
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.
It all sounds good until your mortgage increases by 25% in one year due to increasing property taxes and insurance.
But the same happens to the rental owner, and trust me, they pass that increase on to the renters. So it’s still better than that.
Yeah but repairs don’t get taken care of by a landlord. When you buy a home, you have even less monthly funds available for mortgage because you also need to be saving a little for the big repair things that come up.
Renting allows those repair expenses to be handled by the landlord rather than the tenant. Renting is not inherently a worse decision than buying, there are pros and cons to both.
I own a small house that is 118 years old with plenty of issues, and the amount I put into repairs and maintenance is nowhere near the difference in what it would cost to rent a similar sized home in my neighborhood compared to my mortgage, taxes, and insurance. That includes a major sewage issue that required digging up and replacing the old clay pipes, something I couldn’t do myself.
And I’ve only owned it for 3 years, so I haven’t even gotten to a point where inflation has increased rent over the mortgage payments yet, mosly because the rental market is insane in most cities due to short-term rentals and offshore investors leaving lots of properties off the market, so landlords can charge way higher rents with so little competition. In 10 years, assuming there’s not a market crash, I’ll be way better off.
Renting only saves repair cost in the short term, spreading out those costs across time, because otherwise there wouldn’t be profit in renting. As a renter, you’re never in a position to do that saving because rent is always so much higher than mortgage cost. Even if you have to pay more for the home than the asking price like I did. I just happened to get in before the interest rate hikes is all that I benefited from.
Every home I can afford is a home I can barely afford, for both rent and mortgage.
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
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.
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.
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.
And most of those willing to take on the additional risk will look back at their decision positively. Shit’s not getting any cheaper.
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
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.
At least you roughly lock in a monthly rate. I was happy to not have 15% rent increases each year.
This is the real explanation. There is no more choice to rent a cheap apartment or buy an expensive house. You can live in a van maybe but that’s being outlawed in many states. My brother in law and his family are paying almost $2000/month for a shitty apartment built in the 1970s. I bet the same place will be $4000 in 10 years, and even shittier.
That’s because to get the actual value of a home in 2024 you have to cut its price in half.
So a re-run of 2006-2007, but this time around there wasn’t even an actual boom preceeding this.
I’m in the US. House values in my neighborhood have doubled since 2017 (7 years). Things are the same where the rest of my family lives, 11 states away. Are we not in a boom?
No this is another housing bubble, similar to what happened back in 2010. My house is now worth more than double what I paid for it, which is more than it was at the peak of the housing bubble right before it crashed back in 2010.
But biggest difference this time around is the bubble has been intentionally accelerated by a handful of investment firms that have been buying up all the houses across the US for the past decade.
The Economy is not booming, it’s only the prices of Assets such as houses that are in a bubble.
Last time around the “wealth” (even if illusory) was spreading a lot more and causing all sorts of things to grow by feeding consumption, as well as a general feeling of prosperity (until it turned out it was illusory and the whole castle of cards fell) whilst this time around it’s pretty much only large asset owners who are actually gaining from this whilst the rest just increasingly feel poorer and more treading water ever harder merelly not to drown.
It’s a different Economic climate and even a different feeling for most people, even if both periods share the house price bubble.
PS: And, by the way, this is not just in the US.
Buckle up, here we go again!
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.
Imaging sinking yourself completely just to follow the dream.
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.
