The share of middle-class Americans who are buying wallet-squeezing homes has more than doubled in the previous 10 years.<\/p>\n\n\n\n
Almost 30% of middle-class homeowners bought homes with monthly payments costing more than 30% of their income in 2022, an NBC News analysis of Census Bureau data found. That\u2019s more than twice the share from 2013, with experts warning it leaves many households with less money for groceries and emergencies and less able to get ahead in the future.<\/p>\n\n\n\n
That \u201ccost-burdened\u201d benchmark \u2014 in which a household devotes over 30% of income to housing costs \u2014 is a widely used measure of affordability for both homeownership and renting. The Census Bureau measures housing costs against it, and the Department of Housing and Urban Development has used it for decades<\/a>.<\/p>\n\n\n\n \u201cIt used to be that if you made the median income, you could afford the median-priced house,\u201d said Domonic Purviance, a housing expert at the Atlanta Federal Reserve. \u201cThat\u2019s not the case anymore.\u201d<\/p>\n\n\n\n When Haley and Ben Williams purchased their home Elkhart, Indiana, in December 2023 for $265,000, they accepted a challenging financial scenario. Their mortgage rate was 8.125% \u2014 above the roughly 7% national average at the time, which was hovering near 20-year highs. The couple estimated their monthly costs would include spending $176 on the principal and more than $2,000 on interest, taxes and insurance.<\/p>\n\n\n\n \u201cWe went for a house we knew would be difficult moving forward,\u201d Ben said, but they felt it was a \u201cneeded sacrifice.\u201d \u201cWe have our son and are looking to expand our family,\u201d he explained. And the alternative was continuing to live in a rental with a mold problem that cost $900 a month, a place Haley said they were \u201cso desperate\u201d to get out of.<\/p>\n\n\n\n Homes in their price range \u2014 which they\u2019d hoped would top out at $250,000 \u2014 went fast and to cash buyers, the Williamses said. Elkhart is a city of around 60,000 people about two hours east of Chicago, where a household making the area\u2019s average annual salary of $67,000 would use roughly 22% of its monthly income to pay for a median-priced home of about $240,000 as of August 2024. While that ratio is less than the cost-burdened 30% threshold, it has doubled in the area in just the last three years.<\/p>\n\n\n\n And Elkhart is no outlier. Today, in more than 30% of U.S. counties tracked by the NBC News Home Buyer Index<\/a>, average-income house hunters presented with a median-priced home would end up in cost-burdened territory should they buy.<\/p>\n\n\n\n That reality has left many middle-class families sitting on the sidelines. Those households accounted for 49.7% of new homebuyers in 2022, down from 60.1% in 2010.<\/p>\n\n\n\n Daniel McCue, a senior research associate at Harvard University\u2019s Joint Center for Housing Studies, said record home price growth was one driver of cost burdens, but also rising property taxes and insurance premiums. These have combined with high interest rates to create punishing pressure, even as many Americans are earning more money. From 2013 to 2023,\u00a0the median annual household income in the U.S. has risen 50%<\/a>, to $80,610.<\/p>\n\n\n\n But those pay gains largely haven\u2019t kept up with housing-market conditions, said McCue. \u201cAll these costs are exposing who\u2019s on the margins in terms of paying for their homes,\u201d he said. \u201cYou look at households earning less than $30,000 a year \u2014 it was something like 95% of older adults were cost-burdened.\u201d<\/p>\n\n\n\n He notes that single parents and Black, Hispanic and Native American households are also relatively more affected by cost burdens. \u201cIt\u2019s attached to income inequality and wealth inequality, as well between household types and races and ethnicities,\u201d he said.<\/p>\n\n\n\n Purviance, from the Atlanta Fed, said lower-income households and people on fixed incomes are also experiencing a disproportionate squeeze from housing costs: \u201cThey\u2019re feeling inflation in their rents and homeownership and everything else.\u201d<\/p>\n\n\n\n These pressures frequently require painful economizing elsewhere as families look to keep a roof over their heads. For example, McCue said, cost-burdened homeowners may struggle to keep up with home maintenance, leading to unhealthy or unsafe living environments. That could further erode a nationwide housing stock that, according to one paper from the Federal Reserve<\/a>, already needs nearly $150 billion in repairs.<\/p>\n\n\n\n \u201cYou\u2019re put into distress by any sudden increased costs. You don\u2019t have the freedom to spend that money elsewhere,\u201d said McCue.<\/p>\n\n\n\n Haley Williams said her family has been making it work, but it has entailed some cutbacks. \u201cI\u2019ve been a lot better at utilizing food to prevent waste and limiting the amount of meat we buy and cook because prices are so expensive,\u201d she said.<\/p>\n\n\n\n