Tuesday, September 23, 2008

Income and Housing Costs

We know that income has basically remained flat for the average worker for the last decade or so. But housing prices went up, up and away. Here are some numbers from Yahoo News about Millions spend half of income on housing. The scariest part of the article is that this is gross income, not net income - so factor in taxes and there is not much left. Millions of people living on the edge. Lets take a look at the article -

[M]ore than 7.5 million people — almost 15 percent of American homeowners with a mortgage — are spending half of their income or more on housing costs, according to 2007 data released Tuesday by the U.S. Census Bureau. That is up from nearly 7.1 million the year before.

Traditionally, the government and most lenders consider a homeowner spending 30 percent or more of their income on housing costs to be financially burdened. But that definition now covers almost 38 percent of American homeowners with a mortgage — 19 million of them.


The data underscore the serious affordability problems in this country and highlight how the slightest financial problem — from a lost job to higher gas prices or insurance premiums — can put a family behind on their mortgages and into the realm of foreclosure.

In San Francisco
, more than one out of five homeowners with a mortgage spends half or more of their income on housing.

That's also true in 13 more of the largest 100
metro areas analyzed by the Associated Press. Other places include California metro areas of Stockton, Los Angeles, Riverside, Oxnard-Thousand Oaks, San Francisco, and San Diego. Also in the top 10 are the Fort Myers, Sarasota and Orlando metro areas in Florida, and New York-Northern New Jersey-Long Island.
Housing prices are a huge burden. Interesting that regionally people are also paying a large part of their income towards housing costs. As the crisis begins to reverberate locally things will really hit the fan.

Here is an interesting graph from the same article putting things into perspective -

While the housing market has been going down the percentage of people paying more of the income towards housing has increased. The numbers appear to have an inverse relationship. Pretty scary indeed.

No comments: