39 million households are paying more for housing than they can afford

[inanna]

Source: CNN

June 16, 2017: 1:28 PM ET

Nearly 39 million households can't afford their housing, according to the annual State of the Nation's Housing Report from Harvard's Joint Center for Housing Studies.

Experts generally advise budgeting about 30% of monthly income for rent or mortgage costs.

But millions of Americans are far exceeding that guideline.

One-third of households in 2015 were "cost burdened," meaning they spend 30% or more of their incomes to cover housing costs. Of that group, nearly 19 million are paying more than 50% of their income to cover their housing needs.

Read more: http://money.cnn.com/2017/06/16/real_estate/rising-home-costs-affordability-harvard/index.html

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Here in Canada I spend about 45% of my income on housing (rent). Not sure of the national statistic though.

[bagelsforbreakfast]

1. I think 50% is closer to reality for most folks!@ n/m

[cstanleytech]

4. I suspect it might be pushing 70% as wages have been largely stagnant for decades

for most people but housing costs havent been.

[ailsagirl]

17. Wages HAVE been stagnant for as long as I can remember

while everything else continues to increase in price

[SergeStorms]

30. But there's zero inflation.......

if the government's statistics are to be believed.

I'm retired and living on a fixed income. I have some modest savings and investments (I adore my kids, but they're FOREVER chained to your wallet) salted away for emergencies, and haven't had a COLA in Medicare in.......three or four years? Every year my supplemental insurance premiums increase by at least 20%, and prescription drugs are going through the roof, even Generics.

So don't tell me there isn't any inflation. At this rate I'm going to have to give up living as a cost cutting measure. The GOP certainly doesn't care. They're COUNTING on people, like myself, to die so they can give the wealthy another juicy tax cut. Hey, it's ONLY FAIR, right?

[ailsagirl]

34. We can do the math-- and it hasn't been in our favor for I-don't-know-how-long

MONSTROUS

Hang in there, SergeStorms-- maybe something good will happen to reverse this awful trend.

I can hope

[sandensea]

2. No doubt about it:

[cstanleytech]

3. Sounds like my brother but the problem is he lives near a military base

and that drives up the cost of housing for miles around so he is essentially screwed.

[killbotfactory]

5. This isn't a surprise to anyone who isn't incredibly wealthy. nt

[LisaM]

6. It used to be that you were supposed to budget 1/4 of your income for housing.

But yes, flat wages changed that, add to that the absolute lack of attention government is paying to this issue, and it's really a burden. I am constantly petrified of rent increases (after we, luckily, had a place that kept the rent low for a long time before jumping). Buying in Seattle is completely out of the question at the moment.

[inanna]

10. I learned that formula too...

in Home Economics class in HS.

And when I first left HS, the 25% formula was doable - especially if renting or house-sharing etc.

Now it's next to impossible (round here) to stay within the 30% range - even if sharing.

I consider myself quite lucky that my rent did not go up this year, but it's still too high.

[7962]

7. Where I live, I see the exact same circumstances from 10 yrs ago. Get ready for another fall.

Too many people try to keep up with the Joneses & low rates let them borrow for more house.
My friends laughed at me when I told them in 06-07 what was coming. Even write a couple letters to the paper explaining why people were making a huge mistake.
I see it again; a foreclosure hits the market and has 15 contracts on it the first day, more people NOT in housing are building spec homes. Spec homes in the 300K range (VERY high for my area) are being built. Anyone who has a construction skill is booked for 2-3 weeks at least. And so on.
We'll see if I'm right again. I would say by the end of '18 its gonna hit

[janx]

27. Yes, but it started in the mid 90s.

I witnessed it and bought into it for a couple of years. The banks were like casinos, buying and selling loans, and people were taking on adjustable rate mortgages without thinking about the consequences. Then the banks got reined in when Obama was elected, and the reining-in was swift and harsh, as it should have been. I know this because I both bought and refinanced a little house in 2005, and 2007? Under the new rules, lenders had to be very severe when it came to approving loans. I hope there is some kind of middle ground coming, but I'm afraid of the casino floodgates' opening again under this administration.

[7962]

32. The pendulum always swings too far in both directions! nt

[janx]

33. My thought exactly. n/t

[iluvtennis]

8. How do you get a mortgage approved for more than 30%, they run the numbers...

..here in CA (at least for me they did) and wouldn't approve anything more than low 30s % for mortgage vis-a-vis income.

[janx]

28. Gross income? n/t

[melm00se]

31. mortgage calculations

are almost always based on the gross

[llmart]

9. Define "housing costs".

Does that include utilities? Property taxes? House insurance?

None of those things are options. I own my home but when I add up the property taxes, house insurance, home owners monthly dues and utilities (or even without the utilities) it comes to about 30% of what I'll have if I ever decided to retire for good. It's scary for many people who are around my age. I have an IRA which I don't intend to touch until I'm 70 and have to but so many of my friends/acquaintances don't have much savings.

Younger people can't afford the high rents in some places and those are the places where the jobs are.

[Seedersandleechers]

12. The article states rent or mortgage

My mortgage includes insurance and property taxes.

[llmart]

13. So, just the mortgage amount...

not the taxes and insurance?

I guess I'm trying to make a point about the term "housing costs" since there are so many other expenses involved in owning a home. Even if you're a renter you still have utilities.

Housing in this country is just another glaring example of the gap between the wealthy and the rest of us.

[Luciferous]

16. Most people have their taxes and insurance included in their mortgage payment don't they?

We're on our third house and it's always been put into the escrow account so I would count that as part of my mortgage.

[spooky3]

19. Don't know if it's "most." I've never allowed a lender to escrow

Taxes and insurance (after our first mortgage) because (a) lenders sometimes screw up the payments (ours did) and (b) they want to earn interest on your escrowed dollars before payments for taxes and insurance are due.

Another big category of expense is maintenance and replacement of elements as they wear out--let alone upgrades and cosmetic changes.

[llmart]

22. Same with me.

I always pay my property taxes myself. They don't need to hold onto my money and make interest off it. I'd rather do that myself. You just have to be self-disciplined and put the money aside each month so it's there when they come due.

And yes, I've had them mess up my escrow account too.

[leftyladyfrommo]

23. It is against the law to make interest on escrow accounts.

I worked for mortgage companies for years. I heard that argument all of the time.

That money has to be held in non interest bearing accts.

[spooky3]

24. Please provide a link to the law. The company that is managing the account uses the $ to

Earn income, whether it's from savings accounts, escrows, etc. That's how banks stay in business. Not allowing the financial institution to make interest on deposits would require them to segregate that money somehow. How exactly does that work?

And, some states require banks to pay consumers interest on their mortgage escrow accounts. How is this fair if banks aren't permitted to earn income themselves on the deposits? See this article, for example:

http://homeguides.sfgate.com/can-bank-keep-escrow-funds-interestbearing-account-81783.html

[MontanaMama]

11. The median price for a home in

my town is $315,000. That's a lot for someone starting out. Contractors are building condos and apartments like crazy and they are being rented as soon as they are built. I bought my house in 1995 for $98,600, it just appraised for $425,000. I couldn't buy my own house on my income if I had to today.

[turbinetree]

14. House prices, here is some article(s) that pretty much sums up the big maybe, to the why........

http://www.motherjones.com/politics/2017/05/hedge-city-vancouver-chinese-foreign-capital/


http://www.motherjones.com/kevin-drum/2017/04/are-we-really-housing-bubble/


And if your "wages" can't keep up....................

[Luciferous]

15. Wow, we spend half that amount on our mortgage! Of course, we bought a house that

was less than half of what we were approved for and I am renovating it but even with the cost of improvements I don't think we come close to the 30%. We were closer to that in our old house, but we lived in a much nicer house in a more desirable neighborhood. I think my husband would have a stroke if I told him I wanted to spend half our income on a house lol

[groundloop]

18. But this is a good thing..... more money to the job creators

of course.

With the cost of everything going up, and wages having been stagnant almost forever, this is a sad reality.

[Change2018]

20. Either housing or food

Many people are in the situation to choose either housing or food...

[rzemanfl]

21. Welcome to DU. n/t

[ripcord]

25. I consider my wife and I to be very fortunate

She has been doing school district payroll as a CSEA member for 28 years and I have been driving as a Teamster for 31, we were able to buy our house in 1987. With current housing prices in the L.A. area I'm not sure we could do it today.

[janx]

26. I have online news fatigue.

One- or two-sentence paragraphs don't do it for me. Yes, I know it's electronic, and yes, I teach this kind of thing, but honestly, this is overly simplistic above and beyond the "chunking" of paragraphs.

Income: gross or net? That is the first question. And as some of you have pointed out, there are too many variables involved here. What else is deducted from people's incomes? Mortgage insurance? Rental insurance? Health insurance? What are the federal and tax rates involved? Social security? How many children constitute a household with kids? Does the household get any financial help re the kids? The 30% principle has been a standard for decades, and I *think* it's based on gross income, but this article doesn't make that clear.

Perhaps I'm being overly critical. I don't know what kind of research it would take to consider all of these variables, but a blanket statement like this one doesn't seem very informative. Human beings can be very resourceful; I know most of us have had to be resourceful in all kinds of situations.

Can anybody help me out here?

[TexasBushwhacker]

35. What used to be a goal is now being treated as an absolute

What other debts/commitments does the family have? Do they have a car payment? Two? Student loans? How many mouths to feed are there? If you don't have a lot of other expenses, spending more than 30% might not be unwise. If they have all those expenses, 30% might be too much. It also depends on their overall take home pay. Someone whose takehome pay is $4K a month might be able to afford a $2K house note if they keep their other expenses in check.

No doubt there's a lack of decent affordable housing, but there's no reason to present the problem as worse than it is.

[DAMANgoldberg]

29. 51% here

and I live in one of the cheaper neighborhoods in Charlotte. Doesn't help when the official policy of @NCDHHS is starvation.

[snooper2]

36. This is we need finances 101 in High School mandatory for everyone

A lot of people are stupid when it comes to money.

[LanternWaste]

38. And many lending institutions are simply corrupt

And many lending institutions are simply corrupt, deceiving clients in dept, in obligation and in terms.

Finance 101 would certainly mitigate that...

But as ling as we get to point at "stupid people", we can pretend to be much more clever ourselves, regardless of whether reality warrants that pretense or not.

[snooper2]

39. There is a reason there are pay-day loan shops all over the place

Rent-a-center is doing a killing..

People want it now- want it new, want the fancy...but don't have more than 42.30 in their savings account if one exists. I was horrible with money in my 20's. Could have a lot more now looking back but finally got my shit together. Took years to fix credit, taxes, etc but it was worth it.

But yes. A lot of people are fucking stupid.

For instance, drive to one of those "rent-to-buy" tires and rims places. You have to be a fucking idiot to spend that kind of money and interest so your ride looks "cool" for Friday night LOL. And as long as people are ignorant with their money, there will be somebody standing there ready to take it. Oh, and repo their shit back when you don't pay and pass it on to the next sucker.

[EllieBC]

37. In Vancouver, spending 50% of your income on rent or mortgage is not unusual.

It's depressing and insane, but not unheard of.