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
Small Business Bankruptcy Is On the Rise
The estimated reading time for this post is 147 seconds Entrepreneurship is a challenging journey, often marked by initial success that can be followed by unforeseen difficulties. While 20% of small businesses survive their first year, only half see their...
Roth IRA vs. Roth 401(k): Which Is Better for You?
The estimated reading time for this post is 183 seconds Roth IRA vs. Roth 401(k): Which Is Better for You? As the adage goes, the early bird catches the worm. When it comes to planning for retirement, nothing could be...
1 Comment
Leave Comment
Cancel reply
Small Business Bankruptcy Is On the Rise
Roth IRA vs. Roth 401(k): Which Is Better for You?
Traditional 401(k) vs. Roth 401(k): Which Is Better for You?
Gig Economy
Business / Oct 02, 2023
Small Business Bankruptcy Is On the Rise
The estimated reading time for this post is 147 seconds Entrepreneurship is a challenging journey, often marked by initial success that can be followed by unforeseen...
By MacKenzy Pierre
American Middle Class / Sep 23, 2023
Roth IRA vs. Roth 401(k): Which Is Better for You?
The estimated reading time for this post is 183 seconds Roth IRA vs. Roth 401(k): Which Is Better for You? As the adage goes, the early...
By Article Posted by Staff Contributor
American Middle Class / Sep 15, 2023
Traditional 401(k) vs. Roth 401(k): Which Is Better for You?
The estimated reading time for this post is 181 seconds Traditional 401(k) vs. Roth 401(k): Which Is Better for You? When it comes to planning for...
By MacKenzy Pierre
Finance / Sep 13, 2023
The Imminent Crisis in the U.S. Auto Loan Sector
The estimated reading time for this post is 188 seconds Navigating Through Unsteady Lanes: The Imminent Crisis in the U.S. Auto Loan Sector American consumers are...
By MacKenzy Pierre
Credit Cards / Sep 11, 2023
Mounting Credit Card Debt Sends Shockwaves Through U.S. Economy
The estimated reading time for this post is 171 seconds Mounting Credit Card Debt Sends Shockwaves Through U.S. Economy In a sobering financial milestone, Americans now...
By MacKenzy Pierre
Finance / Sep 09, 2023
Rising Mortgage Rates Send Shivers Through the Housing Market
The estimated reading time for this post is 151 seconds Rising Mortgage Rates Send Shivers Through the Housing Market In a stark and unrelenting turn of...
By MacKenzy Pierre
Finance / Sep 04, 2023
Fixed-Income Boom
The estimated reading time for this post is 280 seconds In the midst of a Fixed-Income Boom, Do Active Wealth Managers Still Hold Sway? In this...
By MacKenzy Pierre
Gig Economy / Sep 03, 2023
America’s Evolving Work Tapestry
The estimated reading time for this post is 168 seconds America’s Evolving Work Tapestry: Stability Amidst Shifting Sands In the intricate tapestry of the American economy,...
By MacKenzy Pierre
American Middle Class / Aug 14, 2023
What is Exactly Maxing Out a 401(k)?
The estimated reading time for this post is 401 seconds Maxing out a 401(k) might sound like financial jargon, but it’s a simple concept that could...
By MacKenzy Pierre
Global Middle Class / Aug 12, 2023
The Interest-Free Installments Economy
The estimated reading time for this post is 264 seconds The Interest-Free Installments Economy: A Macro Perspective The Brazilian government has been attempting to curb revolving...
By MacKenzy Pierre
Latest Reviews
Business / Oct 02, 2023
Small Business Bankruptcy Is On the Rise
The estimated reading time for this post is 147 seconds Entrepreneurship is a challenging journey,...
American Middle Class / Sep 23, 2023
Roth IRA vs. Roth 401(k): Which Is Better for You?
The estimated reading time for this post is 183 seconds Roth IRA vs. Roth 401(k):...
American Middle Class / Sep 15, 2023
Traditional 401(k) vs. Roth 401(k): Which Is Better for You?
The estimated reading time for this post is 181 seconds Traditional 401(k) vs. Roth 401(k):...
Pingback: Buying a Home without a Realtor FMC American Middle Class