Survey: 4.2 million spent half their income on shelter

Number of house-poor families grows

http://www.marketwatch.com/news/story.asp?guid=%7B806AF62F%2DFEDF%2D4664%2DB9AC%2D6C078837839F%7D&siteid=mktw

SAN FRANCISCO (MarketWatch) -- The quick pace of house-price growth is showing its darker side.

The number of working U.S. families parting with more than half their income to put a roof over their heads jumped 76% in five years -- to 4.2 million in 2003 from 2.4 million in 1997, according to a report from Freddie Mac, Century Housing and the National Housing Conference (NHC.) The number includes both renters and homeowners.

Another 800,000 either live in inadequate housing or have both problems -- a severe cost burden and dilapidated conditions -- for a total of 5 million working families that have a crushing housing burden.

These working families aren't necessarily poor. They include those with full-time jobs that pay the minimum wage of $10,700 a year and go up to those earning as much as 120% of the area's median income.

Overall, about 14.1 million low- to moderate-income families, including the elderly and young unemployed people, faced a critical housing need in 2003, meaning they either paid more than half their income for shelter or lived in substandard conditions.

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...and one of two breadwinners looses their job, or the laid off worker takes a job at a lower income, that ratio can go to 2/3 or even higher. Of course, the family may be forced to sell their home and find a cheaper place to live, perhaps end up renting. That's the Bush legacy for America and one that millions of families will be experiencing for years to come.

but I wouldn't buy now if I could. 500K for a 200K home is not a DEAL to me, I don't care if the interest rate is 1%. When the real estate balloon deflates, a lot of poor suckers (who outbid other poor suckers to have that house the size of a matchbox for 389K) won't be able to sell for what they paid. No thank you. I broke even on my last two adventures in home ownership. Never buy in a sellers market.

I'm so proud.

I'm showing my age here, but when I exited college and entered the work force full time (early 70s) the rule of thumb was... "don't spend more than 25% of your gross income on housing".

It generally worked. If you made $12K/year (a nice middle income), $250/month got you a nice place, at least in Chicago.

I'm guessing that today, the families paying just a quarter of their income for housing are few and far between.

It's a damn shame.

:hi:

Glad to have you here!

And I remember that formula. "A weeks work for a months rent", is how it was passed to me.

By the time I was paying rent (in NYC), that formula was useless.

Thanks for the memories, Ovidsen!

Yeah, and welcome to DU.

and all the formulas for budgeting said 25%. My husband and I tried to find suitable housing for 25% and ended up in base housing. I haven't checked lately, but it seems unlikely families can live at 25% - unless they bought in 15 years ago.

State Forum. Don't make Tweed come and get you!

I do believe in your rule of thumb. Until just recently, by the following the 25 percent rule, the housing I lived in was always substandard. I am now following the 25 percent rule only because we made a huge down payment and includes my spouses income in the formula. If anything goes wrong, I will be out of compliance with the 25 percent rule.

How the lamestream media always miss this constantly infuriates me.

there was a runaway bride on the loose.

I will be the first to admit that I am stupid and I have definitely not *arrived* -- but what in the name of God is the purpose of the *interest only* mortgage?

It's portrayed as you are so fabulously wealthy that you need all your money to invest in the market and get the tax cuts of the mortgage interest... but are those really the people taking these loans out?

http://www.interestonlyloans.com/

INTEREST ONLY LOANS - THE FACTS

An interest only loan does not mean you will never pay principal on a home loan. These mortgage programs have what's known as an interest-only payment option attached to the note. In all cases the note will state how long your interest-only payments will last. Let's use a 5 year interest-only loan for example. On a typical 5 year fixed rate under an interest-only program the interest rate is fixed for the first five (5) years of the loan term and your only obligation are interest-only payments during this term. During the beginning of the 6th year (month 61) the unpaid balance is fully amortized over the remaining term and the borrower is now obligated to make principal and interest payments to the lender. Think of it as taking a 25 year mortgage (principal & interest payments) on an adjustable rate note tied to the then current interest rates.

Q: After the interest-only period how will I know my rate?

Although your loan will be subject to future market rates your margin will not change throughout the remaining term of the loan. Your interest rate will adjust regularly (usually on an annual basis) according to the original terms of the interest-only mortgage note. Let's say your note called for your interest rate to be determined by adding the current libor rate + a margin of 2.25. If the libor rate is 2.00% during month 61 you will have a new interest rate of 4.25% until the next adjustment period. It's important to remember that these are now principal and interest payments so your payment may be higher even if your interest rate is lower.

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I make $1200/month (really a little more, but I pretend it's only $1200 so I'll save the extra). I'm moving out of my parents house to get an apartment, and with rent and utilities will be spending about $600 (max) a month. That's half my income.

I became of age in the 60's. My honey and I rented our first apartment at the rate of $75 pm. He worked at GE then making about $650 a month. Ahhhh, life was good then.

Later, he went to work for PGE (utility co. in Calif). We rented a nice place for $95 pm. He was making approx. $800 a month then. It was the early 70's by then. Good times still..

We divorced. I moved to the seashore here in Calif. to rent a cottage (on welfare)for $175 a month. That was high for what I was used to but I did it without the aid of any houging subsidy. Later, I went to work in a factory but the rents had gone up to over $200 a month but that was like half of my income. It was the mid 70's by then. I married again in early 80's and the rents went up to $400 to $600 per month and keep climbing. Today, that same cottage I first rented is going for $2000

It seems like all things changed PDQ when Reagan got hold of power. First in Calif. Then in Washington.

Today, after working, then getting downsized, offshored, and working temp jobs for 12 years, four of us live in a substandard, cramped 800 sq foot dump that goes for $1879 per month using Section 8 Voucher where our portion just jumped from $75 to $428 per month!!!

We wanted to buy something through one of those low income programs but they make it so confussing that I don't know my ass from a hole in the ground when I'm through reading the paper work. They keep changing the "low income" programs each year. If the one I"m looking at had been in operation ten years ago, perhaps I'd be housed in my own dwelling by now. Sheesh

Whadda country!

Yep, half my income, at least. I still shudder to remember what I spent last year replacing windows with condensation that made them look dirty from the outside and ruined the view from the inside. That made last year my most expensive since initially purchasing it 14 years ago.

And of course property taxes keep going up, utilities are going up. My income, on the other hand, is going the other direction.