Many homeowners across the country have found themselves stuck in homes they can’t afford. This has created a group of house poor homeowners — and Florida is full of them. Let’s learn more about what it means to be “house poor” and how people can work to become more budget-minded, even in a volatile housing market.
What does it mean to be house poor
Homeowners spending more than 30% of their income on housing costs are considered “house poor.” This could be due to a variety of things, such as high interest rates or choosing to live beyond one’s means.
The “30% rule” is a popular standard for budgeting. This advice states that homeowners should avoid spending over 30% of their income on housing expenses. But for many homeowners, it’s not an easy rule to follow.
Related: Chart: U.S. Home Price Growth Over 50 Years
These cost-burdened homeowners are facing budget-busting housing expenses such as monthly mortgage payments, property taxes, homeowner’s insurance and utilities.
In order to get a better understanding of where homeowners are living beyond their means, Chamber of Commerce analyzed monthly housing costs and median household income from more than 9 million households across the country via the U.S. Census Bureau.
Their analysis looked at the number of homeowners with a mortgage who spend more than 30% of their household income on housing costs.
Key findings
- Miami, Los Angeles and New York City are the top three cities with the most homeowners living beyond their means. More than 4 in 10 homeowners are considered to be “house poor” in these cities.
- Cities located in Florida and California dominate the list of top 30 cities. Overall, six cities within the top 30 are in Florida and 14 are located in California.
- Nationwide, 27.4% of homeowners are considered “house poor.”
Nearly 3 in 10, or 27.4% of U.S. homeowners with a mortgage are considered to be cost-burdened with housing expenses, according to the Census Bureau. Overall, 21% of cost-burdened homeowners have a household income of less than $75,000.
However, the number of cost-burdened homeowners living in the Miami metropolitan area far exceeds the national average. Overall, nearly 60% of homeowners living in Hialeah, Florida are living beyond their means, according to the Census.
In Tampa, things aren’t as bad. The median household income in Tampa is $101,885 but monthly housing costs are at $1,672. The percentage of homeowners in Tampa spending over 30% of their income on housing costs is 27.4%.
Click here to see the complete list of cities with house poor homeowners.
Cities With the Most Budget-Minded Homeowners
Analysis also looked at cities with the most budget-minded homeowners. Not only do the majority of homeowners in these cities live by the 30% rule, but they go above and beyond it by spending less than 20% of their income on housing expenses.
For example, nearly two-thirds of homeowners in Huntsville, Alabama spends less than 20% of their income on housing costs. Nationwide, less than half of homeowners (47%) spend less than 20% of their income on housing expenses.
Elsewhere, nearly 60% of homeowners in Raleigh, North Carolina are budget-minded homeowners, followed by Pittsburgh, Pennsylvania (59.3%).
Click here to see the complete list of cities with budget-minded homeowners.
How to be more budget-minded
When it comes to owning a home, it’s always best to expect the unexpected.
Monthly housing expenses can build up and quickly eat away at your budget, especially when it comes to mortgages with high interest rates, second mortgages and property taxes.
While the 30% rule can help you gauge how much household income to set aside each month for housing costs, it’s also a good idea to speak with a financial advisor before purchasing a home. Mapping out your mortgage budget in advance can be the difference between being a “house poor” or a “budget-minded” homeowner.
