“It’s a matter of if you make a median income, you can afford a median-priced home,” said Domonic Purviance, a housing expert at the Atlanta Federal Reserve. “That doesn’t happen anymore.”
When Haley and Ben Williams purchased their Elkhart, Indiana home for $265,000 in December 2023, they faced a challenging financial situation. Its mortgage rate was 8.125% – above the national average of about 7% at the time, which was close to a 20-year high. The couple estimates their monthly expenses will include $176 in principal and more than $2,000 in interest, taxes and insurance.
“We chose a house that we knew would be difficult to move,” Ben said, but they felt it was a “necessary sacrifice.” “We have our son and we want to expand our family,” she explained. And the alternative was to continue living in a rent with a mold problem that cost $900 a month, a place Haley said they were “so desperate” to get out of.
Homes in their price range — which they expected to top $250,000 — sold quickly and to cash buyers, Williams said. Elkhart is a city of about 60,000 people, about two hours east of Chicago, where a family earning an average annual salary of $67,000 will use about 22% of its monthly income to pay an average home price of about of US$240,000 by August 2024. Although this ratio is below the 30% cost burden threshold, it has doubled in the area in the last three years.
And Elkhart is no stranger. Today, more than 30% of U.S. counties are tracked by the NBC News Home Buyer Index. Median-income home hunters will end up in cost-burdened territory if they are offered a median-priced home.
This reality escapes many middle-class families. These families represented 49.7% of new home buyers in 2022, down from 60.1% in 2010.
Daniel McCue, senior research associate at Harvard University's Joint Center for Housing Studies, said record increases in home prices are a factor driving the cost burden, but so are property taxes and insurance premiums. . These combined with high interest rates to create punitive pressures even as many Americans earned more money. From 2013 to 2023, US median annual household income increased 50% to $80,610.
But those wage gains have largely not kept pace with housing market conditions, McCue said. “All of these costs expose those on the margins in terms of paying for their home,” he said. “You look at families making less than $30,000 a year — that was something that 95% of older adults were burdened with.”
He noted that single-parent families and Black, Hispanic and Native American families are also relatively more affected by the cost burden. “It’s linked to income inequality and wealth inequality, as well as family type, race and ethnicity,” he said.
The Atlanta Fed's Purviance said low-income families and people on fixed incomes also face disproportionate pressure from housing costs: “They're facing inflation in rents, in property and everything else.”
These pressures often require painful economic measures elsewhere, as families try to keep a roof over their heads. For example, says McCue, overworked homeowners may struggle with home maintenance, leading to unhealthy or unsafe living environments. This could further erode housing stock across the country A document from the Federal Reserve About $150 billion in repairs is already needed.
“You are in danger from any sudden increase in costs. You don’t have the freedom to spend that money elsewhere,” McCue said.
Haley Williams said her family is making it work, but there are some cuts. “I've been really good at preventing food waste and limiting the amount of meat we buy and cook because the prices are so expensive,” she said.
