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Half of Americans can’t afford their house


Half of Americans can’t afford their house
June 3, 2014, 1:58 p.m. EDT

Over half of Americans (52%) have had to make at least one major sacrifice in order to cover their rent or mortgage over the last three years, according to the “How Housing Matters Survey,” which was commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation and carried out by Hart Research Associates. These sacrifices include getting a second job, deferring saving for retirement, cutting back on health care, running up credit card debt, or even moving to a less safe neighborhood or one with worse schools.“Affordability issues are real and a major hurdle,” says Lawrence Yun, chief economist at the National Association of Realtors, an industry group. Home prices have increased 20% over the past two years while wages have barely gone up, he says. “Only by adding more new supply, via housing starts, can home prices be tamed,” Yun adds. In fact, construction of housing units has averaged around 1.5 million a year for the past five decades, he says, but it’s likely to be less than 1 million in 2014.

What’s more, at least 15% of American homeowners (or residents of 78 counties across the country) were living in housing markets where the monthly mortgage payment on a median-priced home requires more than 30% of the monthly median household income — long considered the maximum for rent/mortgage repayments. Housing costs above that threshold are “unaffordable by historic standards,” says Daren Blomquist, vice president at real estate data firm RealtyTrac. In New York county/Manhattan, mortgage payments represent 77% of the median income and in San Francisco County represents 70%.

16 thoughts on “Half of Americans can’t afford their house

  1. Lots of social climbing phonies.
    Low down payment, 30 year loans, leased fancy cars.
    Sound familiar?

  2. Do not forget the bankers that gave unqualified people the loans with no income verification.

  3. Apply for a 30Y fixed rate mortgage up to $417K from the PFRS for 3.68% with a low, flat fee of $1,835. You can refinance it as often as you like for that same flat fee. All thanks to the NJ taxpayer ! Oh, wait…

  4. jjj:

    Do not forget the bankers that gave unqualified people the loans with no income verification.

    That’s a very selective and simplistic statement. Cherry-picking. The causes of the financial meltdown were many and broad-reaching. Very few of us didn’t play a part in it. As for giving unqualified people loans, this was a mixture of pressure from all sides to spread the opportunities of home ownership to those that were once excluded. As for lying on application forms, this was done mostly at the customer and loan officer level, and like I said, was simply taken at face value by the banks being that the train was rolling at 100mph.

  5. Meh. I waited out the bubble and bought a house in Ridgewood which I paid off in 3 years. Bonus: not The Lawns.

    Had I opted for the 30 year albatross, I could have afforded Heights Rd. But I’m not an idiot. I might get laid off, get sick or other. In the immortal words of Wooderson, I’d just as soon have a little change in my pocket.

  6. Leverage is an excellent way to maximize returns.
    @3.5% you should buy as much house as you can comfortably carry.
    Ridgewood homes are a great investment thanks to the highly rated school system.

  7. jjj:

    Do not forget the bankers that gave unqualified people the loans with no income verification.

    “No Doc’ (=no income verification loans) usually required a larger down payment with a higher interest rate.
    Clinton forced Fannie May and Sally May to lower their lending standards, which contributed to the boom, then bust.

  8. #1. You post a lot on this website. Always thinking that everyone around you is a phony and can’t afford what they have.

    I think that you are just jealous.

  9. Anonymous:

    #1. You post a lot on this website. Always thinking that everyone around you is a phony and can’t afford what they have.
    I think that you are just jealous.

    I have no mortgages .
    I have no loans, no debt.
    Sorry to burst your bubble.
    Not jealous of you fakes.

  10. Sure #9

  11. #9 you probably have no taxable income either.
    mortgage interest is deductible so a4% loan really costs you 2%.
    Such a financial guru as yourself should know a better place to invest cash than in Ridgewood real estate…

  12. A home is not an ‘investment’.
    You need a place to live so its better than renting unless you bought at the top of the market and had to sell shortly thereafter.
    Unfortunately the tax code does not allow indexing for inflation so when you sell the house you will get taxed on the amount that exceeds the allowable 250/500 exemption for primary home sales.

  13. With current interest rates and stock market gains you would be a fool to not have a mortgage. I am not saying buy so much house you can’t afford the monthly payments. But buy something with comfortable payments and put down 20%. If you have paid it down over the years get a new mortgage today for 80%.

    By the time you consider the mortgage interest deduction, even a conservative portfolio would earn far more on the cash you hold than you will pay in interest. Taking less mortgage or paying down your mortgage is absolutely the wrong strategy in today’s market. (the only exception being if you have no financial discipline and just spend every $ in your account)

    As for the “prepare for the worst” scenario, it is not as if your house is ever free. You still have property tax, repairs, utilities, insurance, etc. “Owning” your house outright offers less relief than cash in the bank if there is an unexpected job loss or illness.

  14. Some of us don’t like to have a mortgage # 13.
    Many folks don’t trust the stock market and are quite comfortable with a lower return without risking principal.
    After seeing a few market crashes, not everyone has the ‘stomach’ to pull safe equity out of a home and gamble with it. (you cannot beat the hedge funds and computer traders as a small investor)

  15. I have no problem with you doing whatever you want. I am just pointing out that it is not wise financially with interest rates and other economic factors as they are today.

    You don’t have to beat anyone to win at the stock market. Just buy some simple low cost index funds. Let em ride for a decade or 2. There is no 10-20 year period in the past 150 years where you would have seen a loss.

  16. I do have the SP500 @ Vanguard and a few of their others.
    No complaints, enough exposure for my stomach to take, even with their good record.

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