year, even though home prices across the U.S. have taken a major fall.
More than 40 million spent 30% or more of their household income on
housing costs, 600,000 more than in 2007, according to 2008 Census data
released Monday. That includes homeowners with and without mortgages,
as well as renters.
The number of renters increased, while the number of homeowners declined.
A bright spot: The share of homeowners with
mortgages spending nearly a third of their income on housing held
stable in 2008, after steady increases since 2002.
Nearly two in five homeowners with mortgages and
half of renters paid 30% or more of their before-tax income on housing
costs, which is the limit the government sets for determining that
housing is unaffordable, according to an analysis of Census data done
for USA TODAY by the Joint Center for Housing Studies at Harvard University.
Housing costs for homeowners include mortgage
payments, taxes, insurance and utilities. Renter costs include rent and
utilities, if they are paid separately.
The prices of homes this year are down more than
20% compared with the peak of the housing bubble in 2006, according to
the National Association of Realtors.
"Although housing affordability for newly
purchased homes has improved, overall affordability for renters or
owners is unchanged or worse because of the economy," says Daniel
McCue, research analyst at Harvard's Joint Center for Housing Studies.
"People are still hurting."
Fewer homeowners
Reflecting the rapid pace of foreclosures, the number of homeowners dropped by about 142,000.
From 2007 to 2008 the homeownership rate fell
more than half a percentage point, to 66.6% — the lowest level since
2002, says Mark Mather, a vice president at the Population Reference
Bureau in Washington, D.C.
Many of those former homeowners have become
renters, a segment feeling the brunt of steep housing costs. About half
of renters spend at least 30% of their before-tax pay for housing.
Overall, the number of renters swelled by nearly
900,000 in 2008 compared with 2007. In the same time, renters
stretching financially to make their rent rose by 601,000.
"The fact that affordability for renters is getting worse shows the impact of the economic downturn," McCue says.
Renters are also more likely to be severely
financially burdened. One in four paid half or more of their incomes
for housing last year.
"The average monthly rent for a Manhattan
apartment is still very high for most people," says Matthew Baron, who
co-owns a $300 million portfolio of multifamily and other buildings in
the New York area. "We are also seeing a lot of people double or triple up with roommates in order to split the high rental costs."
The new Census data show affordability remains
difficult in many states, even in those hard hit by foreclosures and
falling home values. Median housing costs for owners with mortgages,
after adjusting for inflation, increased in 2008 from 2007 for nine
states and decreased for eight states.
That's partly because existing homeowners aren't
receiving the benefits of cheaper housing. They are often stuck in
their properties, owing more than their homes are worth but unable to
find a buyer.
Miami stretch
Among the top 100 metro areas, most of the top
10 least affordable ones for mortgage owners were in California and the
rest were in Florida.
As in 2007, Miami-Fort Lauderdale remained one
of the largest metro areas where a high percentage of homeowners spent
at least 30% of their income on housing.
"Our home prices are already higher than most
areas," says Mike Premny, a broker and owner of Icon Capital Group in
San Francisco. "People here understand our housing market is unique and
(will pay more)."
He says banks may approve loans where borrowers
put a greater amount of their income for a mortgage if they have solid
credit and make large down payments.
David Kerr, a Realtor with Zip Realty in the San
Francisco area, says buyers are willing to stretch because they believe
their home equity will grow over time. First-time buyers especially are
willing to spend a higher proportion of their incomes to become owners.
"To be able to have a house they want, it's worth having peanut butter sandwiches for a year," Kerr says.
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