Housing Market

Half of American households are struggling to cover rising housing costs

Some respondents reported skipping meals, working extra hours, or even delaying necessary medical treatments to make housing costs

Since the spring of last year, a typical family with a median income has not been able to afford a median-priced home, according to the National Association of Realtors’ (NAR) Housing Affordability Index.

Half of U.S. homeowners and renters (49.9%) sometimes, regularly or greatly struggle to afford their housing payments, according to a recent Redfin survey. This struggle has led to sacrifices for millions of American families.

For many, the sacrifice means skipping vacations; approximately 34.5% of homeowners and renters in financial distress have foregone holidays to meet their monthly obligations. Skipping vacations was the most common answer among Asian/Pacific Islander respondents (43.8%) and white respondents (39.6%). When it came to age groups, skipping vacations was the top choice for baby boomers (42.8%), Gen Xers (36.8%), and millennials (31.3%).

However, for a substantial portion, the sacrifices run deeper. About 22% have resorted to skipping meals, while 20.7% have taken on extra work hours. Additionally, a significant 20.6% have sold personal belongings to make ends meet.

Black respondents who struggle to afford housing were most likely to say they worked extra hours (25.9%) to cover their monthly costs, while Hispanic respondents were most likely to say that they sold belongings (28.2%). For Gen Zers, the most common sacrifices were working extra hours, selling belongings and skipping meals, amounting to 27%.

Furthermore, over 17% of individuals struggling with housing costs have borrowed money from friends or family, while a similar percentage has tapped into their retirement savings. More alarmingly, 15.6% have delayed or foregone necessary medical treatments due to financial strain.

Specifically, 13.5% of millennials, 27.5% of baby boomers, and 15.5% of Gen Xers struggling with housing affordability have dipped into their retirement funds. It’s particularly prevalent among baby boomers because they are often already retired and on a fixed income, leaving them few other options. Only 6.5% of Gen Zers, many of whom lack substantial retirement savings, reported doing the same.

The IRS usually taxes people who make withdrawals from their retirement accounts before the age of 59.5, but makes an exception for qualified first-time homebuyers, who are allowed to borrow up to $10,000 tax free.

“Housing has become so financially burdensome in America that some families can no longer afford other essentials, including food and medical care, and have been forced to make major sacrifices, work overtime and ask others for money so they can cover their monthly costs,” Redfin economics research lead Chen Zhao said in a statement. “Fortunately, the country’s leaders are starting to pay attention, and homebuyers may get a reprieve in June if the Federal Reserve cuts interest rates, which would bring down the cost of getting a mortgage.”

As of now, mortgage payments are nearing all-time highs as mortgage rates near 7% and the median U.S. home sale price is up about 5% from a year ago. The typical household earns roughly $30,000 less than it needs to afford the median-priced home, and rents are rising again.
In March, President Biden unveiled a number of initiatives aimed at making housing more affordable during his State of the Union address. His proposal includes a $10,000 tax credit for both first-time homebuyers and people who sell their starter homes; the construction and renovation of more than 2 million additional homes; and cost reductions for renters.

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