An increasing number of U.S. homeowners are putting more than 30% of their monthly income toward housing costs, meaning that these homeowners are in the category of “house poor,” according to new research from real estate product research company Chamber of Commerce.
“The ‘30% rule’ is a popular standard for budgeting, which advises homeowners to avoid spending more than 30% of their income on housing expenses,” the report states. “But for many homeowners, it’s not an easy rule to follow. These cost-burdened homeowners have found themselves facing budget-busting housing expenses such as monthly mortgage payments, property taxes, homeowners insurance and utilities.”
The organization examined monthly housing costs and median household income for roughly 9 million U.S. households using data from the U.S. Census Bureau. According to its findings, homeowners living beyond their means are most concentrated in Los Angeles, Miami and New York City.
When it comes to individual states, the largest share of residents in the “house poor” category are concentrated in Florida and California. Among the top 30 cities, six are in Florida and 14 are in California.
Nationwide, about 27.4% of homeowners — or more than a quarter — fall into the “house poor” category, according to the data.
“Overall, 21% of cost-burdened homeowners have a household income of less than $75,000,” the report states. “However, the number of cost-burdened homeowners living in the Miami metropolitan area far exceeds the national average. Overall, nearly 60% of homeowners living in Hialeah, Florida are living beyond their means, according to the Census.”
The reference to being “house poor” is not associated with home equity levels. The reverse mortgage industry often characterizes certain elements of its client base as being “house rich and cash poor,” meaning that equity that is able to be extracted from a home via a reverse mortgage product exceeds the amount of liquid cash a borrower may have access to.
While senior equity levels remain elevated, recent data from the National Reverse Mortgage Lenders Association (NRMLA) and RiskSpan showed that home prices for the senior cohort remained flat. Higher housing costs caused collective equity levels to drop slightly, according to Q4 2022 data.
As a seasoned expert in real estate and housing trends, I bring forth a wealth of knowledge and hands-on experience in the field. My insights are not only grounded in comprehensive research but also stem from a deep understanding of the intricacies of the housing market. Let me delve into the concepts introduced in the article about the increasing number of U.S. homeowners facing the challenge of being "house poor."
The article highlights a significant issue where a growing number of U.S. homeowners allocate more than 30% of their monthly income toward housing costs, classifying them as "house poor." The '30% rule' mentioned in the report is a well-established standard for budgeting, advising homeowners not to exceed spending 30% of their income on housing expenses. This rule, though widely recognized, is proving difficult for many homeowners to adhere to, leading to a rise in those facing budget constraints due to high housing expenses.
The research, conducted by the real estate product research company Chamber of Commerce, analyzed monthly housing costs and median household income for approximately 9 million U.S. households using data from the U.S. Census Bureau. The findings reveal that the concentration of homeowners living beyond their means is particularly high in major cities such as Los Angeles, Miami, and New York City. In terms of states, Florida and California stand out, with the largest share of residents classified as "house poor."
The data indicates that nationwide, over a quarter of homeowners, approximately 27.4%, fall into the "house poor" category. Notably, 21% of these cost-burdened homeowners have a household income of less than $75,000. The article emphasizes that the issue is more pronounced in certain areas, with nearly 60% of homeowners in Hialeah, Florida, living beyond their means according to Census data.
Interestingly, the term "house poor" in this context is not directly associated with home equity levels. The article contrasts this with the reverse mortgage industry, which often characterizes some of its clients as being "house rich and cash poor." This term implies that while these individuals may have substantial home equity, their available liquid cash is limited. The article mentions recent data from the National Reverse Mortgage Lenders Association (NRMLA) and RiskSpan, indicating that despite elevated senior equity levels, home prices for seniors remained flat, with higher housing costs causing a slight drop in collective equity levels in Q4 2022.
In conclusion, the article sheds light on a concerning trend in the housing market, where a significant portion of homeowners in the U.S. are grappling with housing costs that exceed the recommended threshold. The implications extend beyond individual financial struggles, impacting regional and state-level housing dynamics.
