10 HOUSING CHALLENGES FACING THE MIDDLE CLASS
By Article Posted by Staff Contributor
The estimated reading time for this post is 185 seconds
10 housing challenges facing the middle class despite a decade-plus economy recovery. Historic low-interest rates, lax underwriting procedures, and tax credits and subsidies ushered the last housing bubble, and eventually, the housing crisis.
A decade-plus into the current economic expansion, the housing market, in most cities, has reached its pre-crisis peak, which presents many severe challenges for those who want to enter or re-enter the housing market.
Here are 10 challenges facing middle-income Americans and how to overcome them:
Affordability
According to Zillow, the median price of homes currently listed in the United States is $289,000 compared to $148,000 in January 2012. The median listing price in San Francisco and Miami are $1.3 million and $475,000, respectively. Although the interest rate on a 30-years fixed mortgage is at 3.50 percent, it is difficult for the middle-class buyers to get approved for such a large amount.
Down Payment & Closing Costs
Using the median listing price of $289,000 mentioned above, a potential FHA buyer will need at least $18,785 for down payment ($289,000×0.035=$10,115) and closing costs ($289,00×0.03=$8,670). The majority of those who are in the middle-class don’t have that large sum of money at their disposable. Matter of fact, a new study by Bankrate found that 21 percent of working Americans are not saving any money for retirement or emergencies at all.
Credit
Auto loan default is putting stress on credit scores. According to Experian, a record number of Americans are three months behind on their car payments. The Federal Housing Administration (FHA) requires a minimum credit score of 580 and a 3.5 percent down payment for them to guarantee any loans issued by banks, credit unions, and online lenders. Keep in mind credit scores that low will make the loan more expensive.
Location
The overuse real estate adage, location, location, and location reigns true here. According to Zillow, the median price of homes currently listed in Lubbock, Texas, is $189,950 compared to $475,000 in Miami, FL. Because of an uneven economic recovery, people have to move where the jobs are. And where the jobs are in urban areas such as San Francisco, Miami, and New York.
Gentrification
Gentrification is defined as a process of changing the character of a neighborhood through the influx of more affluent residents and businesses. An uneven economic recovery pushes more and more urban neighborhoods to be gentrified.
Gentrification brings artisanal bread, yoga, and juice bars, which increase real estate prices. Little Haiti, Overtown, and Wynwood, once considered low-income neighborhoods, are now hipster neighborhoods with art galleries and wholefoods.
Availability
There is a severe shortage of housing inventory; developers are not building as many starter homes as needed. They prefer building luxury homes because they make more money off them.
Student and other Debts
The Average American has roughly $38,000 in student loan debt. When factoring credit cards, auto loans, and personal debts, the typical middle-class American is already highly leveraged way before they think about buying a home. A high debt-to-income ratio is one of the main reasons many mortgage applications get denied.
Zoning Laws
Upper-middle-class Americans have been using zoning laws effectively to prevent developers from building low-income and starter homes in their suburbia—all in the name of protecting their home values.
Private Equity Landlords
According to Bloomberg, real estate investment trusts, private-equity firms, and hedge funds have spent at least $25 billion purchasing houses since 2012. They converted the properties into single-family rentals, which exacerbate the availability problem mentioned above.
Local, State, and federal incentives
Before the housing crisis, local, state, and federal governments used to incentivize the middle class to buy houses. Almost all those incentives went away; they need to come back with better oversight.
The housing challenges facing middle-class Americans are real. Something has to be done before it becomes a full-blown crisis.
RELATED ARTICLES
How to Build Wealth: Start Your Own Business
The estimated reading time for this post is 567 seconds How Do You Build Wealth: Start Your Own Business is the latest article from our “How do you build wealth” series Read “How Do You Build Wealth: Invest in...
How Do You Build Wealth: Invest in Real Estate
The estimated reading time for this post is 436 seconds How Do You Build Wealth: Invest in Real Estate is the latest article from our “How do you build wealth” series Read “How Do You Build Wealth: Invest in Financial...
1 Comment
Leave Comment
Cancel reply
2023 US Stock Market Outlook
2023 IPO Draft Class:Ranking the Top Prospects
Re-Drafting the 2022 IPO Draft
Gig Economy
Stock News / Jan 23, 2023
2023 US Stock Market Outlook
The estimated reading time for this post is 107 seconds The 2023 US stock market outlook is an exciting topic, as it is difficult to predict...
By Article Posted by Staff Contributor
Stock News / Jan 23, 2023
2023 IPO Draft Class:Ranking the Top Prospects
The estimated reading time for this post is 301 seconds The dismal performance of blockbuster IPOs such as electric car maker, Rivian, the trading platform Robinhood,...
By MacKenzy Pierre
Stock News / Jan 16, 2023
Re-Drafting the 2022 IPO Draft
The estimated reading time for this post is 95 seconds The U.S. IPO market plummeted in 2022, with 181 deals raising $9 billion, including special-purpose acquisition...
By MacKenzy Pierre
American Middle Class / Oct 25, 2022
How to Build Wealth: Start Your Own Business
The estimated reading time for this post is 567 seconds How Do You Build Wealth: Start Your Own Business is the latest article from our...
By Article Posted by Staff Contributor
American Middle Class / Sep 26, 2022
How Do You Build Wealth: Invest in Real Estate
The estimated reading time for this post is 436 seconds How Do You Build Wealth: Invest in Real Estate is the latest article from our “How...
By Article Posted by Staff Contributor
American Middle Class / Sep 14, 2022
What Does the Hot Inflation Report Mean for the Housing Market
The estimated reading time for this post is 100 seconds The benchmark 30-year fixed mortgage might hit 7.5% by the end of the year. Rate hikes...
By MacKenzy Pierre
American Middle Class / Sep 11, 2022
How Do You Build Wealth: Invest in Financial Assets
The estimated reading time for this post is 350 seconds How Do You Build Wealth: Invest in Financial Assets is the latest article from our “How...
By Article Posted by Staff Contributor
American Middle Class / Sep 05, 2022
How Do You Build Wealth: Make Wise Financial Decisions
The estimated reading time for this post is 405 seconds How Do You Build Wealth: MakeWise Financial Decisions is the latest article from our “How do...
By Article Posted by Staff Contributor
Personal Finance / Aug 31, 2022
How Do You Build Wealth: Save your money
The estimated reading time for this post is 329 seconds How Do You Build Wealth: Save Your Money is the latest article from our “ How...
By Article Posted by Staff Contributor
Personal Finance / Aug 27, 2022
How Do You Build Wealth: Get A Good Job
The estimated reading time for this post is 377 seconds How Do You Build Wealth: Get A Good Job is the latest article from our “...
By MacKenzy Pierre
Latest Reviews
Stock News / Jan 23, 2023
2023 US Stock Market Outlook
The estimated reading time for this post is 107 seconds The 2023 US stock market...
Stock News / Jan 23, 2023
2023 IPO Draft Class:Ranking the Top Prospects
The estimated reading time for this post is 301 seconds The dismal performance of blockbuster...
Stock News / Jan 16, 2023
Re-Drafting the 2022 IPO Draft
The estimated reading time for this post is 95 seconds The U.S. IPO market plummeted...
Pingback: Buying a Home without a Realtor FMC American Middle Class