Do I delay a medical procedure or miss a mortgage payment? Should I skip a week of lunches to make my rent? How much could I get on Facebook Marketplace for this gently used ottoman? Can I ask Mom for money again this month... or maybe I should ask Dad?
These are the tough decisions that a growing number of homeowners and renters are being forced to make to cover monthly housing costs in an ever-less affordable U.S. housing market.
A Redfin survey, fielded nationally in February to roughly 3,000 current homeowners and renters, found that nearly half (1,494) of those respondents indicated they sometimes, regularly, or greatly struggle to afford regular rent or mortgage payments.
While the most common sacrifice of those struggling to afford their monthly housing costs was taking no or fewer vacations (34.5%), many people reported making much more serious sacrifices over the past year:
- 22% skipped meals
- 20.7% worked extra hours at their job
- 20.6% sold belongings
- 17.9% borrowed money from friends and/or family
- 17.6% dipped into retirement savings
- 15.6% delayed or skipped medical treatments
“Housing has become so financially burdensome in America that some families can no longer afford other essentials, including food and medical care, and have been forced to make major sacrifices, work overtime and ask others for money so they can cover their monthly costs,” said Redfin Economics Research Lead Chen Zhao. “Fortunately, the country’s leaders are starting to pay attention, and homebuyers may get a reprieve in June if the Federal Reserve cuts interest rates, which would bring down the cost of getting a mortgage.”
Mortgage payments are close to all-time highs on account of rising home prices and elevated mortgage rates, which have been hovering near 7%. National median home sale prices were 35% higher than national median household incomes in February.
Strong Jobs Data In March
While an interest rate cut would reduce costs for those shopping for homes this spring or summer, it would not alleviate financial strains for most current mortgage holders and renters.
In pursuing twin mandates of maximum employment and stable prices, the Federal Reserve is operationally blind to homeowners' and renters' mounting financial woes except as they have an impact on broader market conditions.
Strong labor data released Friday complicates the rate-cut forecast for the Federal Reserve, given that inflation levels hung around 2.5% in February, a slight rise form January. Employers added more than 300,000 jobs in March, beating labor market expectations by nearly 100,000 jobs.
“Investors may see another strong jobs report as further evidence that rate cuts may not be imminent," said First American Deputy Chief Economist Odeta Kushi. "On the surface and under the hood, this was a goldilocks jobs report. Strong payroll growth, but the growth was non-inflationary – year-over-year wage growth is slowing, labor participation is up.”
The private sector added 232,000 jobs overall last month, while the construction sector added 39,000 jobs, roughly double its average monthly gain in the past year. After plunging during the pandemic, employment in hospitality and leisure now sits above February 2020 levels.
Average hourly earnings for all private confirm payroll jobs were up 4.1% year-over-year in March, down from 4.3% year-over-year growth in February.
Redfin's survey of struggling homeowners and renters indicates the typical household is still earning roughly $30,000 less than it needs to afford median-priced homes, though, and rents are rising again.
Different Demographics Make Different Sacrifices
The survey also found that race/ethnicity and age informed the kinds of sacrifices homeowners and renters were making.
White respondents struggling to afford housing were most likely (20.7%) to use retirement savings to cover housing costs, followed by Asian/Pacific Islander respondents (14%), Hispanic/Latin respondents (13.6%), and Black respondents (12.6%).
Black respondents struggling to afford housing costs were most likely to say they worked extra hours (25.9%), while Hispanic respondents were most likely to say that they sold belongings (28.2%). Skipping vacations was the most common answer among Asian/Pacific Islander respondents (43.8%) and white respondents (39.6%).
While nearly one in every seven millennials (13.5%) dipped into retirement savings to cover their monthly housing costs, baby boomers were most likely to dip into retirement funds, with over one-quarter (27.5%) saying they did so. Roughly 15.5% of Gen Xers reported dipping into retirement savings.
Gen-Z homeowners and renters reported that most common sacrifices were working extra hours, selling belongings and skipping meals, all of which registered at roughly 27%.
