Mortgage expenses account for 30% of income, and 30% of the middle class are -housing slaves-

In recent years, the landscape of homeownership has drastically changed for the middle class in America. Once able to afford mid-range homes, many are now feeling the financial strain. A recent analysis by NBC News of Census Bureau data shows that in 2022, nearly 30% of middle-income families were spending over 30% of their monthly income on mortgage payments—more than double the rate seen in 2013.

Experts warn that when housing costs consume such a large portion of a family’s budget, it becomes much more difficult to cover everyday expenses and save for emergencies, ultimately leaving families with less ability to improve their living conditions in the future.

The 30% income threshold is commonly used to evaluate whether homeowners and renters can afford their housing costs, a standard employed by the Census Bureau and the Department of Housing and Urban Development for decades.

Domonic Purviance, a housing expert from the Atlanta Federal Reserve, commented, “In the past, if you were middle class, you could afford a mid-priced home. That’s no longer the case.”

Haley and Ben Williams, who purchased a home in Elkhart, Indiana, for $265,000 in December 2023, are acutely aware of their financial burden. With a mortgage interest rate of 8.125%, which is above the nearly 20-year national average of 7%, they can only cover $176 of the principal payment each month, with more than $2,000 going toward interest, property taxes, and homeowners insurance.

This is the sacrifice the Williams family has chosen to make; otherwise, they would be stuck renting a moldy apartment for $900 a month as they prepare to welcome a child. Homes priced below $250,000, which they could afford, are often quickly snatched up by cash buyers, forcing them to settle for a more expensive property. In August 2024, families with a median income of $67,000 in Elkhart must spend 22% of their income to afford a median-priced home at $240,000—a significant increase from just three years ago, although still below the 30% threshold.

The NBC News Homebuyer Index reveals that over 30% of counties across the nation are experiencing a ratio of home prices to income that leaves potential buyers feeling they can’t afford a home. Consequently, many middle-class families are hesitant to enter the market.

In 2022, only 49.7% of families decided to “grimace and bear it” to buy a home, a stark decline from the 60.1% that made the plunge in 2010.

Daniel McCue, a senior researcher at Harvard University’s Joint Center for Housing Studies, cited skyrocketing home prices as a primary factor behind this shift, compounded by rising property taxes and homeowners insurance costs that have left many feeling overwhelmed. While the median household income rose by 50% between 2013 and 2023 to $80,610, rising interest rates have heavily weighed on the shoulders of “house poor” homeowners.