This may not come as a shock to anyone, but there are some interesting elements to this story.
Homeowners in every state but one spent more of their incomes on housing costs last year than at the start of the decade, according to data released Tuesday by the Census Bureau.
It's an interesting mix of home prices, income and interest rates.
Here's how the Census Bureau sets its definition.
Housing costs are defined as mortgage payments, taxes, insurance and utilities.
Nationally, things don't look so bad, but that depends on where you live.
Nationwide, homeowners spent nearly 21 percent of their incomes on housing costs last year, up from just under 19 percent in 1999.
The government has determined that housing costs are "excessive" if they top 30 percent of household income. Right now, over one third of homeowners with a mortgage are at or above that level. 7 years ago that figure was 27 percent.
“It is now much more difficult for first-time homebuyers to get into the market, and for existing homeowners to trade up,” said Mark Zandi, chief economist at Moody’s Economy.com. “This decline in affordability is the catalyst for the current sharp decline in housing activity.”
Household incomes have also dropped by 2.8 percent during that same 7 year period.
But there is good news.
America’s home ownership rate is at a near-record 68.7 percent. But some housing advocates warn that declining affordability will make it difficult for low-income owners to keep their homes.
Some of these problems have been exacerbated by lending institutions who have lent money to prospective homeowners who were in way over their heads. These "predatory lenders" get their money and leave a kind of "scorched earth" behind them. I'll never forget hearing a story from an acquaintance of mine who refinanced their house without ever having to declare an income. The lender wasn't interested. They simply used a credit score to determine elegibility. This acquaintance's income had dropped by 25%, but it didn't seem to matter. But I digress...
Nearly half of California homeowners — 48 percent — spent more than 30 percent of their incomes on housing last year.
“We really are reaching the outer edge of the envelope of what people can manage,” said Cynthia Kroll, senior regional economist at the University of California at Berkeley.
And living that close to the edge should be cause for concern. With no margin for error, a slight downturn could turn disastrous for people.
Comment Preview