Janice R. Andrews
In recent years, a troubling trend has emerged in the American housing market: an increasing number of middle-class families are stretching their finances to the limit to purchase homes. According to a recent NBC News analysis of Census Bureau data, nearly 30% of middle-class homeowners now allocate more than 30% of their income to housing payments, a significant jump from 2013 when less than 15% faced similar financial pressure.
The Rise of “Cost-Burdened” Homeowners
Housing experts use the term “cost-burdened” to describe households spending over 30% of their income on housing. This benchmark, long used by the U.S. Census Bureau and the Department of Housing and Urban Development, has become increasingly relevant as the gap between income growth and housing costs continues to widen.
Domonic Purviance of the Atlanta Federal Reserve notes a significant shift in housing affordability: “It used to be that if you made the median income, you could afford the median-priced house. That’s not the case anymore.” This change has forced many middle-class families to make difficult choices between homeownership and financial stability.
A Case Study: The Williams Family
The story of Haley and Ben Williams from Elkhart, Indiana, illustrates the challenges many families face. In December 2023, they purchased a $265,000 home with an 8.125% mortgage rate, significantly above the national average. Their monthly payment of over $2,000 primarily covers interest, taxes, and insurance, with only $176 going toward the principal.
The Williams’ decision to stretch their budget was driven by a desire to provide a better living situation for their family, despite the financial strain. Their story is not unique; in over 30% of U.S. counties, households earning the average income would be considered cost-burdened if they purchased a median-priced home.
The Broader Impact
This affordability crisis has far-reaching consequences:
- Declining Homeownership: Middle-class households accounted for only 49.7% of new homebuyers in 2022, down from 60.1% in 2010.
- Disproportionate Effects: Lower-income households, single parents, and minority groups are more likely to experience cost burdens.
- Maintenance Concerns: Cost-burdened homeowners may struggle to keep up with routine home maintenance, potentially exacerbating issues with the nation’s aging housing stock.
- Lifestyle Sacrifices: Families like the Williams are forced to cut back on essentials like groceries to balance their budgets.
Factors Contributing to the Crisis
Several factors have contributed to this growing affordability gap:
- Record home price growth outpacing income gains
- Rising property taxes and insurance premiums
- High interest rates
- Broader income and wealth inequality in the U.S.
While median annual household income in the U.S. rose by 50% to $80,610 from 2013 to 2023, this increase has not kept pace with the rapid escalation in housing costs.
Long-Term Implications
As housing affordability continues to decline for middle-class buyers, the financial trade-offs become increasingly challenging. This trend has long-term implications for the financial stability and well-being of a significant portion of the American population. It also raises questions about the sustainability of the current housing market and the need for policy interventions to address this growing crisis.
