The great American Dream has always revolved around owning a home. Sure, having the 2.3 kids, the cushy corporate job and the stylish car to drive to work everyday are part of the myth, too, but nothing quite summed up Americana quite like the white picket fence. But if recent economic numbers are any clue, this dream is becoming a nightmare for many in the US.
According to date released by the United States Census Bureau, an increasing number of homeowners are spending a larger and larger amount of their incomes on housing than in previous years. People in 49 out of 50 states reported an increase. The only state that didnt, Alaska, spent the same amount. The report showed that people are spending around 21 percent on their housing needs, up from 19 percent in 1999.
This is a huge problem for first-time buyers who may now be priced out of housing markets all across the country. Economists point to rises in home prices in the last 7 years, as well as higher interest rates, coupled with stagnant wages over the same period.
While everyone seems to be in agreement that the housing bubble is either bursting, or getting ready to burst depending on where you live, housing prices are still up a remarkable 32 percent since the beginning of the decade.
Household incomes, on the other hand, havent done a very good job of keeping up. The same Census report showed that income has actually dropped, not risen, over the past 7 years, down 2.8 percent.
Maybe the worst news in the report was the percent of people who allot more than 30% of their income for housing. The numbers are up almost 8%. National guidelines suggest that more than 30% of household income for housing is excessive and not financially healthy.
What does this mean in the long run?
Most experts agree that until income can catch up to housing, the real estate market will remain lifeless. And since real estate is one of the biggest drivers to the overall economy, a weak real estate market means a weak economy.
Things appear to be the worst in California. Not only do they have the most expensive real estate in the nation, 48 percent of California homeowners spend more than 30% of their income on housing related costs.
Until income can begin to grow as quickly as the real estate market, this trend shows no signs of slowing down. Which could mean that the upcoming real estate slump could last much longer than anyone predicted.
TAGS:Realty Trac
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