Americans spending much more on housing

Hillary Wicai Oct 3, 2006

KAI RYSSDAL: It’s the first week of the month. So chances are you just wrote out a big check to cover the mortgage. For a lot of people those checks are getting bigger. The Census Bureau says homeowners in 49 of 50 states are spending more of their incomes covering the cost of real estate. Marketplace’s Hillary Wicai reports.

HILLARY WICAI: The government says housing costs ideally shouldn’t be more than 30 percent of household income. But today’s data from the Census Bureau show over a third of homeowners with a mortgage had housing costs that topped that mark in 2005. That’s up from about 27 percent in 1999.

JEFFREY LUBELL: “The danger in paying too much of your income for housing is that you don’t have enough money available to pay for other necessities.”

Jeffrey Lubell is with the Center for Housing Policy, a nonprofit that works on housing challenges.

LUBELL:“What we’re seeing as housing prices are going up is that property taxes are going up, property insurance rates are going up, families are increasingly taking out exotic mortgages that are putting their homeownership status at risk.”

Homeowners at risk include those who used adjustable-rate mortgages to get into the housing market in the last few years.

Mark Zandi at Moody’s says those rates are now going up, but workers’ incomes aren’t keeping pace.

MARK ZANDI: As you go back to the start of the decade, the household in Miami earning the median income could afford 125 percent of the media-priced home. Today, that same household earning the median income can afford to buy only half the median-priced home.

It all adds up to a sharp drop in housing sales. And Zandi says it’s not likely to change quickly. The housing market has softened in many areas, but home prices are still higher than they were.

Median home values jumped 32 percent from 2000 to 2005, to $167,500.

In Washington, I’m Hillary Wicai for Marketplace.

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