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Millions of Americans spend half of income on housing costs
By Adrian Sainz and Alan Zibel
Associated Press
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MIAMI -- Al Ray is so strapped for cash, the only time he eats out is on Wednesday or Sunday, when the local McDonald's sells hamburgers for 49 cents.

Ray lost his engineering job last November, and has been working as high school tutor, scratching out about $1,000 a month - if he's lucky. He struggled to make his $1,400 monthly mortgage payment and $330 monthly homeowners' association fee until May, when he stopped paying.

Ray, 44, is looking for work and renting out a room in his two-bedroom condo in Davie, Fla., for $500, but his monthly income doesn't match his expenses and he's facing foreclosure.

"I barely have money to survive," he said.

Ray is one of more than 7.5 million people - almost 15 percent of American homeowners with a mortgage - who are spending half of their income or more on housing costs, according to 2007 data released Tuesday by the U.S. Census Bureau. That is up from nearly 7.1 million the year before.

Traditionally, the government and most lenders consider a homeowner spending 30 percent or more of their income on housing costs to be financially burdened. But that definition now covers almost 38 percent of American homeowners with a mortgage - 19 million of them.

Though home prices have fallen this year, in the most expensive markets where home prices tripled during the boom, many working families still cannot afford to buy a home.

"We had a bubble," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. "This is a case where we absolutely want the market to adjust."

The data underscore the serious affordability problems in this country and highlight how the slightest financial problem - from a lost job to higher gas prices or insurance premiums - can put a family behind on their mortgages and into the realm of foreclosure.

When home prices fell in the early 1990s, borrowers had more equity in their homes, and were able to escape foreclosure. But now, an estimated 10 million homeowners owe more on their mortgages than their homes are worth, according to Moody's economy.com.

More than 4 million homeowners were at least one month behind on their loans at the end of June, and almost 500,000 had started the foreclosure process, according to the Mortgage Bankers Association.

Cascading foreclosures over the past two years created a domino effect in the lending industry, undermining investor confidence and forcing the Bush administration last weekend to announce the greatest rescue package and market intervention since the Great Depression.

And yet, the deal will not help Dolly Hanna, 51, and her husband, who bought five homes in the San Francisco area over the past 20 years, and were enjoying life during the housing boom by renting them out.

But her husband's overtime at his mechanic's job was cut, and the Hannas now find themselves overextended at a loss of $15,000 per month and trying two sell two of the homes.

With four children, Hanna had been a stay-at-home mom, but Monday she started a job in real estate. They are seeking a renter for two upstairs bedrooms in their primary residence for $1,200.

Getting a loan during the boom was easy, Hanna knows. Too easy.

"All you had to was massage the information enough to fit it into their round hole, and they gave us a mortgage," Hanna said.

In San Francisco, more than one out of five homeowners with a mortgage spends half or more of their income on housing.

That's also true in 13 more of the largest 100 metro areas analyzed by the Associated Press. Other places include California metro areas of Stockton, Los Angeles, Riverside, Oxnard-Thousand Oaks, San Francisco, and San Diego. Also in the top 10 are the Fort Myers, Sarasota and Orlando metro areas in Florida, and New York-Northern New Jersey-Long Island.

But the most cost-burdened homeowners in the country live the Miami-Fort Lauderdale-Miami Beach metro area: 58 percent of homeowners spending 30 percent of their income on housing costs, and 29 percent spending half of their income or more on housing.

Though prices here are dropping, the high cost of land, construction, insurance and property taxes makes living in South Florida too expensive for some.

"Certainly, we hear about people leaving South Florida and going into Atlanta where they can get into a house for less money," Suzanne Weiss, associate director for real estate with Neighborhood Housing Services of South Florida.

To help with the affordable housing stock, Neighborhood Housing Services of South Florida joined forces with a construction company to build homes for low- to moderate-income residents that include energy-efficient appliances and hurricane-resistant windows.

Other cities and states are also taking action.

In Illinois, a network of 15 nonprofit housing groups gives free advice to struggling homeowners seeking to avoid foreclosure amid rising mortgage payments.

In New England, an affordable housing program funded by the Federal Home Loan Bank of Boston awards grants and low-interest loans to communities to encourage affordable-housing initiatives for very low- to moderate-income households.

And in Las Vegas, the Nevada Fair Housing Center is helping Rita Harvey renegotiate her mortgage from $2,700 to around $1,800 per month.

Harvey, 64, lives on about $3,300 a month in social security and disability payments for herself and her four disabled grandchildren. She nearly lost her home this summer after her adjustable rate mortgage payment jumped.

"I did not understand that in two years, this would adjust out of control," she said. "Nobody deserves what I've had to go through."

Take a look
In this July 2, 2008 file photo, a foreclosed home is seen for sale in Sacramento, Calif. A record 9 percent of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June, as damage from the housing crisis continues to mount, the Mortgage Bankers Association said Friday, Sept. 5, 2008. (AP Photo/Rich Pedroncelli, file)
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Reader comments on this story - 17 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

Crybaby wrote on Sep 24, 2008 10:07 AM:

" I agree: Ray the Engineer could get a job at McDonalds. Just the incentive the McDonalds Corp. needs to build a ‘gut bomb’ joint on every corner. And all the folks being laid off on Wall St. could go to work picking strawberries. And laid off NASA scientists could surely get work around here walking beans. If you just happen to be a Computer whiz, why not learn Cantonese. Or the 22 official languages of India. And go where the work is. Hey, turnabout’s fair play. Maybe you’ll even meet a nice Indian or Chinese family on their way over here. To take the work that you ‘didn’t wanna’ do’. And to those losing their homes, it’s not our fault that you bought into the Republican’s ’Ownership Society’. Or that you didn’t understand that ‘ownership’ to most Americans means renting from the Bank. Or that ‘Socialism’ has inconveniently reared its ugly head. Just in time for the election. And just in time to help out the truly needy on Wall St. No, I agree with Senator Gramm: just ‘quit whining’. At least until we all find out just how much trouble is really ‘out there’. "

diamond cutter wrote on Sep 23, 2008 3:36 PM:

" And everyone told me to buy a house because of all that equity that was going to bring perfect happiness..... My rent hasn't changed in 15 years, but my salary has quadrupled. I guess the beaches and slopes will be bear this winter's vacation while everyone enjoys their big homes that apparently they could never afford, but told me I was missing out on. "

STLCards5 wrote on Sep 23, 2008 1:43 PM:

" There's having compassion for those in need and then there's indifference for people who know better being completely irresponsible with their money and then expecting the governement to bail them out. "

candy wrote on Sep 23, 2008 1:31 PM:

" Everyone is making it sound like this guy is a waster looking for a handout. Maybe he had an adjustable rate mortgage, maybe he had a good job, maybe circumstances caused this situation. I agree the solution is to sell the extremely overpriced condo and move to a cheaper area; however, the housing market isn't the greatest right now anyway. This is happening all over the country, people. Lighten up. This isn't because these people are too lazy to get jobs, it's because our economy/housing/banking market isn't making it easy for people to survive, and those that were once living comfortably are now scrapping for money. There is no 'quick fix' for that. "

noogie wrote on Sep 23, 2008 1:21 PM:

" In other words, millions of Americans are living out of their means and have no common sense when it comes to finances whatsoever. "

tammy wrote on Sep 23, 2008 1:14 PM:

" There are not jobs everywhere. I don't understand how you figure that. There are a bunch of places laying off left and right. Mitsubitsi in Bloomington layed off people, Interlake in pontiac is laying off people, theres a possiblility here shortly over 600 workers will be out of a job b/c the Prison in pontiac is closing. If there was jobs out there that paid the bills then I would think everyone would be rushing to them. "

Woodford Pundit wrote on Sep 23, 2008 12:44 PM:

" Well, it seems clear to me that the answer is "affordable housing" and "a living wage", although, if you take the cost out of the housing, then what is the living wage?

Ahh, we'll just let the government sort it out. They're really good at this stuff. "

gelfing wrote on Sep 23, 2008 12:34 PM:

" johnd...

I just drove back to work from lunch and saw at least 3 places with help wanted signs. I see them everywhere. Can't find a full time one? find 2 part time? But I truly believe as shechem does, jobs are to be had for those that are willing to take them. "

AK wrote on Sep 23, 2008 12:24 PM:

" I agree with you “shechem”!
There are jobs out there, if you look. It may not be the job you want or were educated for, but it is a job. I am all for helping those that can not help themselves, but there needs to be some accountability! "

BUrns wrote on Sep 23, 2008 12:12 PM:

" Pixie: these aren't people that saved all their life, made sure they had a plan and a backup plan, executed it and then got blasted by some fluke (i.e. Katrina, 9/11 economy, space aliens landing). These are the people that had $$$$ in their eyes, thought they could "work" the system and get the big house on the hill they knew deep down they could never afford. And now that's blown up, they cry foul, as if somehow their "plan" was always justified since everyone else was doing it. No pity. "

Just Nobody wrote on Sep 23, 2008 12:11 PM:

" In the old days, very few people had a big mortgage. And people were lucky to have one car. Now everyone is trying to have it all and were surprised by this?

Fyi, my first mortgage, my wife and I had to come up with twenty percent down, and perfect credit, and that twenty percent down could not be put on some credit card! It was checked, and verified and tough to do. But we did it. That all turned into " Just sign right here" no money down, and thirty years at whatever rate it changes to. None of this news shocks me, it was going to happen. "

pixie wrote on Sep 23, 2008 11:46 AM:

" This is what is wrong with our society, people have absolutely no compassion for others. I sure hope you never make a mistake, never find yourself in a rut, because then you will be completely alone because it was your dumb mistake, right? Because you wernt as perfect as others who are in a position to help? Is that REALLY how you think it should be? We should all be looking out for eachother, not condemning those who fail, but picking them back up and helping them out. Failure is part of human nature and everyone will at some point in their lives, fail...

"It is no measure of good health to be well adjusted to a sick society." Krishnamurti "

2tired wrote on Sep 23, 2008 11:16 AM:

" All these people are expecting a hand out. What about us that are making our payments every month. I pay taxes I am tire of the goverment alway helping the lazy what about us that work hard for a living make our payments we should get some breaks some time. The breaks shouldn't be for the extremely rich or lazy. "

STLCards5 wrote on Sep 23, 2008 10:52 AM:

" And where did all of Dolly's savings go during the housing boom that her and her husband enjoyed? Oh that's right, they probably spent it on overpriced designer clothes, nice cars and furniture. And now we're supposed to feel sorry for them.

Next we'll have to feel sorry for people having to pay back their maxed out credit cards. "

WorkinTheOpinionBoard wrote on Sep 23, 2008 10:44 AM:

" I've no sympathy for someone paying $1500 a month for a 2-3 bedroom house. Regardless of the housing market at ANY point, that's a ridiculous amount of money. "

johnd wrote on Sep 23, 2008 10:44 AM:

" shechem just where are these jobs?What rock did you just xrawl out from under?Maybe partime jobs are around but not true fulltime. "

shechem wrote on Sep 23, 2008 10:13 AM:

" Sorry Al, get a full time job at McDonalds and add another $1000 a month to your cash flow. There is plenty of work for people who actually want jobs and want to pay for what they signed papers to pay for. Come on Dolly if everyone is losing thier homes you should have no problem finding renters, you took a risk and lost, not my problem. Rita, in 64 years no one ever told you to read the fine print? 4 grandkids on disability???? What are the odds of that? "
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