Housing: Ownership: Percentage of Income

The 2007 average percentage of income homeowners use for housing expenses. Thirty percent is the industry standard for measuring financial security.
The 2007 average percentage of income homeowners use for housing expenses.  Thirty percent is the industry standard for measuring financial security.  

Related "Issue of the Day" Entries

Foreclosure Fix for Underwater Mortgages
Published Friday, March 6th, 2009

In the news, President Obama’s housing foreclosure fix has opened for business on Wednesday. The program aims to help up to 9 million borrowers stay in their homes by refinancing their mortgages or adjust loans to lower monthly payments. This news comes just as a new report suggest that one in five US homeowners or 8.31 million properties with mortgages owe more to their lenders than their homes are worth.

To participate in the loan modification plan, borrowers must: have obtained their mortgage before Jan. 1, 2009; have a primary mortgage of less than $729,500; live in the property; fully document their income by providing tax returns and pay stubs; sign a statement of financial hardship; and go for counseling if their total household debt – including auto loans, credit cards and alimony – totals more than 55% of their income. The program will be in effect until the end of 2012, and the loans can only be adjusted once. The adjustment will reduce interest rates for 5 years so that borrowers’ total house payments do not exceed 38% of the homeowner’s monthly income.  The government will then subsidize servicers dollar-for-dollar to reduce the ratio to 31% or to the point of 2% interest. There are incentives for both the lenders when they readjust the loans and the homeowners if they keep up the payments.

The value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half of this decline in California. The study, by First American Corelogic, stated that another 2.16 million properties could go underwater if home prices fall another 5%.

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Foreclosures Turn Prime Real Estate for Squatters
Published Tuesday, February 10th, 2009

With the number of foreclosures growing nationwide, organizations like ‘Take Back the Land’ are identifying the foreclosed homes and moving in individuals and families who are homeless. Yes, it is illegal; yet, once they’re inside, anyone can pay the utility companies to keep water and lights running. It seems the organization screens its chosen ‘squatters’ to live in foreclosed homes; their rational is that the homes they occupy will be kept better than if the homes were left to the elements and unscreened ‘squatters.’ Rep. Marcy Kaptur, a Democrat from Ohio, basically agreed in saying, “I say to the American people, you be squatters in your own homes. Don’t you leave.”

With 215,749 foreclosures in December, up 6.8% from November, this brings December foreclosure filings 97% higher than the number of foreclosures in December 2006. RealtyTrac said Nevada had the highest foreclosure rate in 2007 at 3.4% of all households, or three times the national average. Florida was second highest, with a foreclosure rate of more than 2.0%, and Michigan was third at 1.9%. California was one of the top ten states with the highest foreclosure rate, but was first in actual number of foreclosures in 2007 at 481,000. Except for Michigan, the states that have the highest rates correspond with the states that have the highest percentage of household income devoted to mortgage payments.

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Spikes in Foreclosures
Published Thursday, October 23rd, 2008

The Wall Street Journal has reported that the FDIC has suggested a new plan to coax lenders into modifying at-risk loans with the lure of government guarantees on those loans. With both candidates wanting to stall and possibly fix foreclosures, a look at the number of affected or at-risk homeowners is in order.

Many mortgages going into foreclosure are resulting from the more than 38% of American homeowners who are paying over the industry threshold of 35% of their income for their housing. Spending 35% of monthly gross income on housing is commonly used as a threshold by financial and real estate experts to judge if homeowners will encounter difficulties paying for their residences. Foreclosures on mortgages, as reported by Realitytrac inc., that have gone into default have increased in all states but Alabama. Six states, California, Florida, Arizona, Ohio, Michigan and Nevada, accounted for more than 60% of all foreclosure activity in the last quarter, with California alone making up more than a quarter of all U.S. foreclosure filings. To further the problem for homeowners, sales of new one-family houses in August 2008 has slumped to 11.5% below the revised July rate and is 34.5% below the August 2007 estimate leaving many struggling homeowners with large mortgages that they know are at-risk.

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Learn More

National Association of Realtors - http://www.realtor.org/research.nsf/pages/EcoIndicator?OpenDocument
In addition to NAR's own existing-home sales series, NAR Research monitors other indicators such as new-home sales, housing starts, producer prices, mortgage rates and more.

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Neighborhood Networks - http://www.hud.gov/offices/hsg/mfh/nnw/nnwgetinvolved.cfm
Since 1995 Neighborhood Networks has helped bring computer access and lifelong learning opportunities to residents living in HUD insured and assisted housing. Neighborhood Networks centers thrive in communities that are supportive and involved. Neighborhood Networks centers and local and national organizations work in partnership to share resources and services. Volunteer and make a strategic investment in a Neighborhood Networks center near you.