General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhat's your housing cost as a percentage of your income? As a teen, what were told it should be?
When I was in school, back in the early 80s, I was told you should expect to spend about a third of your income on housing. I spend closer to 43% now. I have more than few friends who spend a majority of their income on the roof over their heads.
I pointed this out to my dad (age 77) he replied that in the 50s he was told by his teacher to expect to spend about 25% of take home on housing. Want to know why everyone feels like their barely scraping by these days? Housing costs are sucking up more and more of our income, but they really don't generate nearly as many jobs as other forms of economic activity. If housing costs were less inflated, we'd be well on the road to recovery AND our national savings rates wouldn't be so laughable.
How do those numbers stack up to your experience? What were you told and how much do you actually spend?
Cleita
(75,480 posts)and half for a halfway decent one bedroom. Of course I was making women's wages then or about 67% of what a man would earn for a similar job. Right now I spend about a fourth or 25% but that's only because my family rents my place to me for a little more than half of what they would get on the market. However, I also help them out on their grounds, looking after animals and gardens when they can't.
al_liberal
(420 posts)and the rule of thumb was they would only loan you twice your annual income. I've never allowed myself to break either one. But I was also always told that owning a home was the best investment one could make and doing so lowers one's income taxes.
Bucky
(53,795 posts)al_liberal
(420 posts)Owning a home costs way more than one saves in taxes. Just another oft repeated "given" that's wrong. Kinda like not closing your jacket in the winter will make you catch cold.
upaloopa
(11,417 posts)You deduct you interest and taxes which only reduces your taxable income. Then your taxes are calculated base on you marginal rate. Without the deduction your taxable income is greater this your taxes Re greater.
virgogal
(10,178 posts)generation,born in the early 40s,made out very well on real estate.
Very well.
tammywammy
(26,582 posts)For myself it's 2x. I think more than that and you're stretching it. I spend a little less than 25% on housing, probably 25% if you include gas & electricity.
Brickbat
(19,339 posts)Bucky
(53,795 posts)rocktivity
(44,555 posts)according to a consumer advice radio program I heard as a preteen. I've used that yardstick all my life, which works out to 23%.
rocktivity
Bucky
(53,795 posts)And how does that match up to your own situation?
rocktivity
(44,555 posts)I'm paying just slightly over that now -- about 28%.
rocktivity
BanTheGOP
(1,068 posts)Home ownership, in a nutshell, is a scar on our nation. Specifically, the government needs to be in control of all property, including the ability to build new homes as needed, and allocate the houses to people based upon need and income disparity. In short, no reason why we should have to let predatory banks hold mortgages on our livelihoods, instead we need to ensure a more progressive ownership model that eliminates private ownership, and all the capitalist destruction that goes along with it.
upaloopa
(11,417 posts)Sometimes it seems only the happy clappy side of things is mentioned.
leftstreet
(36,076 posts)That's right, we the people do
upaloopa
(11,417 posts)as your post
Bucky
(53,795 posts)Sorry, friend, I'm just not seeing it. You idea sounds great until someone has to go kick granny out of her home because the kids went to college and her hubby died.
SheilaT
(23,156 posts)Surely you jest.
FreeJoe
(1,039 posts)I've not seen much success with state provided housing. It seems to suffer from two serious problems. First, when the state provides it, they don't seem to have enough incentive to make it someplace people actually want to live. Second, when people don't have a financial stake in their housing, they tend not to take care of it as well.
dem in texas
(2,672 posts)This is crazy talk, you want the government to allocated houses for people? Are you for real?
upaloopa
(11,417 posts)Our house payment less the interest and tax deduction is less than we were paying in rent.
Liberal_in_LA
(44,397 posts)Bucky
(53,795 posts)Like you personally, where do you fall percentage wise?
DCBob
(24,689 posts)yes, I agree housing costs especially renting has definitely gone up. I think its supposed to be no more than 1/3.
FreeJoe
(1,039 posts)There are so many variables that it is hard to make good comparisons. I think that in the city I live (greater Houston area), housing costs have probably gone up roughly with inflation. That is, I think real housing costs have stayed flat and have only increased in nominal terms.
One trend that I've definitely noticed is that people have been buying larger and nicer houses. When I was a toddler in the 60s, my peers all lived in < 2,000 sq ft houses. When I got older, we moved into a 2,800 sq ft house. When my kids were toddlers, we lived in a 2,400 sq foot house. When they got older, we moved into a 3,300 sq ft house. Aside from the size, a lot of other things about the houses improved - more efficient appliances (especially air conditioning), granite countertops instead of laminates, tile and wood floors instead of carpet and linoleum, etc. I imagine that if I bought a new house built to the same standards as the one I lived in as a child, it would probably be cheaper than it was then, adjusting for inflation.
ohheckyeah
(9,314 posts)We just refinanced which lowered our payment by almost $300.
kiva
(4,373 posts)but that goes up to about 30% when I factor in a loan I took out to fix up the house. The good news is that the loans will be payed off in about 5 years, so then I'll be back to the original figure.
Buns_of_Fire
(17,119 posts)I remember the days of "expect to spend 25%" (or one paycheck a month). And, for a while (we're talking about early 70's), I could stick to it. But then gas was also about 35 cents a gallon, and I was younger and more willing to go 2 out of 3 falls with a palmetto bug for that last slice of pizza.
1-Old-Man
(2,667 posts)Real property taxes are about 5% of our annual social security benefit (both mine and my wife's combined) and the rest is in maintenance and repairs. Our house is not insured, never has been, but that would only add about another 2% or so.
TheKentuckian
(24,934 posts)Same house but luckily I'm doing better now.
25% seems nearly impossible and my rent is fairly low and my income is better than most, though below median.
SheilaT
(23,156 posts)In the 1970's mortgage money got very tight and mortgage interest rates skyrocketed. That's also when wives entered the labor market in very large numbers. Around then the rule of thumb became about a third.
I'm currently paying about a third of my income for my mortgage. I keep on thinking I should refinance.
I'd say about 35% of my net income, after taxes and health insurance, goes to housing and utilities, including electricity, water, and all electronics.
Now add food, car, and miscellaneous expenses, and it rises to about 75%.
I don't know how going on Medicare or Medicare Advantage will affect that percentage yet, but rent is going up a lot this year I noticed. The housing market here is not renter friendly lately with all the influx of people. If Medicare costs make up the rent difference, that would be great, though. We'll see....
Jamastiene
(38,187 posts)It is an old SWMH and it is in a small Bible Belt(where most people mimic the Phelps family ideology), hateful, miserable town that most people spend their lives trying to escape.
Actually, at this point, I call it a hovel too, but I do love this little place and the neighborhood. It's the rest of the entire county that I can't stand. If we could spread my little neighborhood out and make the rest like it, this place would be great.
But, the trust is, if you live in a larger or even medium sized city, you are paying way way way too much for rent, usually. That is the main reason I never moved. Why pay more when I can live cheaper and visit the larger cities when I want to?
I paid off my mortgage years ago.
These days it's just maintenance, taxes, and insurance.
ileus
(15,396 posts)with taxes and insurance escrowed in.
MissB
(15,800 posts)Ten years ago, before we sold our former house and bought this one, it was 20%. And in both cases, we had/have 15 year mortgages.
The rule of thumb that dh and I both used was 25%. Which explained why dh passed up a really nice house on our old block when first buying a house. It was only $30k more, but was more than 25% when considering the costs of ownership of the larger property/house.
We earn more than we did when we first got together, so it makes the numbers better. It's why we can afford to set aside for retirement and college costs for the kids. If our percentage was higher, we'd have to cut something back.
bhikkhu
(10,708 posts)after which I'm down to a sane and manageable 35%.
cyberswede
(26,117 posts)We put an addition on our house a few years ago, so we have a separate mtg. for that. If it weren't for that portion of our payment, we'd be closer to 20%.
geek tragedy
(68,868 posts)taught_me_patience
(5,477 posts)and up to 40% of gross on the monthly payment. Our current housing cost is 10-15% of gross depending on the month.
pangaia
(24,324 posts)That includes mortgage, HOA fees on my condo, plus everything- heat, electric, taxes, repairs, insurance.. what did I leave out-- town water,,everything...
I was renting before, a very modest apt. and I suspect whomever is living there now is paying darn near what I am...
FreeJoe
(1,039 posts)I own my home and no longer have a mortgage. The only thing that I consider as housing costs are insurance (homeowners and flood) and property/MUD taxes. If you are looking at housing affordability in my area, you would probably want to use the cost of renting my house as a basis rather than my current out-of-pocket expenses.
As for income, are we talking about pre-tax or post-tax? Should I include things like 401K contributions and other out-of-pocket retirement savings? What about company paid retirement savings like 401K match or pension fund contributions? Does employer provided health care count in your question? What about the imputed rent on my home?
For the sake of simplicity, my out-of-pocket housing costs as a share of my AGI from my 1040 works out to about 4%. If you looked at what I would be paying as a renter and included imputed rent in my income, it works out to something like 17%.
As a teen, I heard a variety of rules. One was that your mortgage payments (assumed to include homeowners insurance and taxes paid into escrow) should be no more than 33% of your take-home pay. I also remember hearing that it should no more than about 25% of your gross income. I was also told that these figures varied based on income. As people earned more, they didn't proportionally increase their spending on food and clothing, so they had more money to spend on housing.
X_Digger
(18,585 posts)We didn't buy more house than we need, nor did we buy into the snooty McMansion or trendy neighborhood craze.
spinbaby
(15,073 posts)We bought a house cheap decades ago and it's long paid off, so all we now have is property tax amounting to about 2% of our income--it helps that we haven't been reappraised since we moved here. Of course, if you count maintenance and utility costs, our cost is considerably higher.
oldhippie
(3,249 posts)House is paid for. Property tax, homeowners insurance and city trash/water service is about $500/mo. My retirement income is about $6000/mo. I live in a fairly new 2000+ sqft house on an acre lot in Texas. I planned for this.
I realize I am an anomaly here.
Lex
(34,108 posts)kelly1mm
(4,719 posts)sammytko
(2,480 posts)Adsos Letter
(19,459 posts)Right now it's just a hair over 6%, including our property taxes and insurance.
We purchased a modest tract home 20+ years ago, resisted the temptation to take out any home equity loans, and have refinanced over the years from an initial 8+%, down to about 3% currently.
Our incomes have also increased regularly over the years, and that certainly helps.
We pay extra on the principal each month so, barring any disasters, we should own it in about five more years.
Earth_First
(14,910 posts)We purchased a 'starter home' to begin, like both our parents did. Were remodling it as we go and Will most likely trade "up" to a smaller footprint new build cabin on property in the next 10-15 years.
distantearlywarning
(4,475 posts)Guess what? We did FHA first home buyer, bought a house way under our potential budget, only put down 5K, and have no issue at all making our payments. Actually, we could almost triple our mortgage payments and still be ok every month. And our house has appreciated nearly 50% in value since we bought it, partially due to sweat equity and partially due to buying at the right place at the right time (probably going to sell this summer to "trade up" on a bigger fixer-upper - use the appreciation to put down on the next place).
Count me among those who are damn happy they didn't wait to save up 20% before buying. We'd still be waiting. If I had to do it again, I would have bought sooner, frankly. Home ownership has been the bomb. But again, we bought way less house than the lenders told us we could have. I think that's the secret, not how much you put down.
That includes utilities and property taxes. Net income.
I was told from between 25% and 30%. So when we were looking for a house, I took 30% of our gross income as the upper limit on mortgage payments (which included insurance and taxes). The mortgage broker thought us crazy because we qualified for a much bigger loan with much bigger payments.
Since then our family income's gone up.
Median family income for our neighborhood was lower than our family income. Our neighbors were paying a substantially higher percentage of their income for housing. But they knew that when they signed their mortgage agreement. There's been a lot of turnover in our neighborhood since then.
stevenleser
(32,886 posts)I was always told to aim for 25%, so I am a little off from where I would want to be.
Cobalt Violet
(9,905 posts)It's getting very bad.
Live and Learn
(12,769 posts)But we still don't have a lot left over for savings. The under 10% does not include house taxes or utilities.
JaneyVee
(19,877 posts)juxtaposed
(2,778 posts)I'm union and my wages have kept up with inflation.
Our wage negotiation's are held to the inflation rate and most times we meet those goals.
unrepentant progress
(611 posts)But I'm disabled and only receive SSDI so obviously I'm an extreme case.
Doremus
(7,261 posts)unrepentant progress
(611 posts)1/3 of your income should go toward housing.
I was taught 30%, but I feel more comfortable being able to have savings, and I would not have any if I was paying 30%.
Hell Hath No Fury
(16,327 posts)About 50%. I am in SF and I have 2 roommates. At 53. Kind of depressing.
Was told back in the day 25%.
Heywood J
(2,515 posts)That's $1,160,000.
Next time I'm back home, I'll see if the construction hoarding for that building is still up so that I can take a picture. Others say "starting from the low 600's!" and urge me to hurry before they're all sold out.
It didn't start out that way.
I bought the place at the peak of the market, when a health crisis with my grandson required my son and grandson to move back in with me. I was moving out of state to take care of my mom's health crisis; they came with me. I bought a place big enough for all of us, instead of the tiny cottage I'd been living in.
I planned to sell it when the grandson's situation was resolved and they moved back out. They did that as the market was crashing. I was left upside down, and without the extra income from my son.
Then, in response to the economic crash, my contractual days, and pay, were cut. Several years in a row, with this last year the worst.
I've been barely hanging on.
laundry_queen
(8,646 posts)That's about where I am right now...