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.
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.
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…
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.
When the options are rent you can barely afford or a mortgage you can barely afford ,the choice is obvious .
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.
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…
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
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?
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.
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.
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.
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.
Yes, because if they don’t then somebody else will and they won’t have anywhere to live.
That’s how shortages of essential commodities work. Build more homes where people want to live and ensure businesses don’t buy them for renting.
We don’t have an issue that there aren’t enough houses. We have more than enough houses. The issue is that they’re not being utilized primarily because they’re just being bought up for value by corporations.
I keep seeing that but I don’t buy it. There are corporation owned homes and there are empty homes, but I don’t think they’re the same homes.
I’m struggling to think of any logical way that you could make more money buying a property and leaving it empty on purpose while watching the value go up, than you would by doing the exact same thing while collecting a colossal monthly rent.
Most “empty” homes that don’t have the roof caved in or boarded up windows in suburban slums are holiday homes and air BnB type things.
I mean, if an entrepeneur owns a significant portion of the available houses in a region then they can chose to only keep the as few on the market at a time as possible to force the prices to stay high, they might even work with their other housing entrepreneur buddies to have them do the same thing so that all the housing entrepreneurs in the region can win big.
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.
Where I am, one would need to be making $29.70/hr (working 40 hours a week) to afford to only be paying 30% of their income on housing, and there aren’t many actual slums left. State minimum wage is $14/hr. Federal is $7.25/hr. The cheapest bottle of alcohol and a thin rag costs $12.95, though you can save a quarter if you rip your shirt into strips instead of using rags.
Buckle up, here we go again!
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.
No, it’s exactly the same. Actually. Not even factoring in that as a homeowner, you’re responsible for the replacement of all your appliances, your roof, paint, walls, HVAC, plumbing, water heater, and on and on. And we are talking surprise $20,000 repair.
Do you think you are not somehow paying for each and every one of those expenses as well as a healthy return to investors, in your rent?
Depending on how much the investor’s interest rates are they could be covering maintenance costs, making a profit, and still charging less than a new mortgage at current interest rates. So depending on your landlord and how much profit they’re trying to squeeze, renting might be a better option than buying right now.
You’re delusional if you think renting is “cheaper” than owning. Sure you don’t pay those piddly expenses when you’re renting, but with your own home you’re building equity and with rent prices how they are you can still save money on top of house repairs better than renting
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.
Imaging sinking yourself completely just to follow the dream.
Imagine needing shelter to survive
Imagine that there are alternatives to home ownership.
Imagine needing shelter to be a legally recognized resident.
Every home I can afford is a home I can barely afford, for both rent and mortgage.
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.
That’s because to get the actual value of a home in 2024 you have to cut its price in half.
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.
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.
