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How the Increase in Housing Costs is Affecting Families Across the U.S.

How Increased Housing Costs is Affecting Families Across the U.S.

By andrewdeen14Published 2 years ago 4 min read
How the Increase in Housing Costs is Affecting Families Across the U.S.
Photo by Mika Baumeister on Unsplash

Everyone living in the United States has noticed that things cost more now than they did a few years ago. Inflation is still much higher than average, and many families are having to make tough choices about how they spend their money. Housing, which is most families’ biggest expense, has been a major source of worry for millions as costs rise.

Families need a safe and secure place to live, but it hasn’t been easy to buy or rent in the last few years. During the pandemic, with low interest rates prompting many people to buy, the cost of houses went way, way up and bidding wars were common. Although the market has started to cool off somewhat, mortgage rates are much higher than they were in 2020 and the prices are still out of reach for most families, especially as inflation remains high.

So, what do these increased housing costs mean for families in the U.S.? Let’s take a look.

Some Families Have Given Up on Ownership

It’s part of the American Dream to own a home. Yet, many people are unable to save up for a down payment or afford a monthly payment on a home. Even if they can afford the payments, homes are in short supply in many areas, and buyers who cannot afford to get into a bidding war or put forward a larger down payment are likely to be passed over.

Dr. Jaime Peters, an Assistant Dean and Assistant Professor of Finance at Maryville University explains how all of these problems are interconnected:

“…many Americans have been priced out of the housing market. The smallest set of inventory is in starter homes -- the most affordable type of home. Individuals and couples are unable to purchase that first home due to a lack of inventory and are forced to rent longer from corporations and landlords. Higher prices on larger homes have prevented people from trading up and vacating starter homes. It has a ripple effect.”

Because of this ripple effect, many families are choosing to wait on home ownership or have given up altogether. The lack of affordable housing affects individuals and the economy as a whole.

Rentals Are Getting More Expensive

Because real estate prices remain high, rental costs are going up as well. People who are unable to buy a home and those who have given up on home ownership, even if just for the time being, have to compete for the same rentals.

Even if the monthly rent is relatively affordable, the upfront costs of moving into a new rental can be astronomical for the average family. Some landlords require the first and last month’s rent, plus a security deposit up front—which can end up being as much as a down payment on a home. Additionally, broker fees might apply on top of these costs.

These upfront costs of getting a rental can make it difficult for families to move, even if they really need to. They also make families vulnerable should the landlord decide to sell the building or otherwise request that they move out by the end of their lease.

Many Americans live paycheck to paycheck and don’t have the savings they need to move into a new rental if they need to. This means that some families will become homeless or will have to rely on various forms of public assistance long-term to get by.

Families Are Being Pushed Out

Securing housing near work and school is becoming a luxury that many families cannot afford. As housing prices increase in urban areas, many families are being forced to find rentals or homes farther away from their daily responsibilities. This results in more stress, increased transportation costs, and less time for work-life balance.

Financial Situations Are Complex, Not One-Size-Fits All

It’s expensive to be poor, and many people struggle to improve their financial situation for various reasons, including a lack of education needed for higher-paying jobs, inability to save for the future (due to low pay, job loss, pay cuts, etc.) and/or a lack of financial literacy and accounting knowledge.

Dr. Jaime Peters, Assistant Dean and Assistant Professor of Finance at Maryville University explains how one simple calculation is simply unrealistic for many people in today’s economy:

“The popular 30% rule (you should spend no more than 30% of your income on housing) is actually a relic from legislation on affordable housing and while it works for middle- and upper-class Americans, is unrealistic for many poorer Americans.”

Some people are choosing financial therapy to help them better manage their money and improve their financial situation. However, rising costs mean that personal responsibility will only get families so far as they try to improve their living situation.

High Housing Prices Reduce Families’ Savings

Most Americans carry debt, and few people have even a small nest egg in savings. Many families have very little left over after paying their rent or mortgage for other necessities. It’s a precarious situation with no easy solutions.

However, as more and more people struggle to find affordable housing, it’s an issue that we’re going to have to face. People deserve to have a safe and comfortable place to live. Right now, that’s getting harder and harder to access.


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