Census Data Underlines Challenge of Housing Affordability

Today the U.S. Census Bureau released detailed tables for the 2011 American Housing Survey, a comprehensive survey on housing produced biennially that includes everything from average apartment costs to how many bathrooms you’ll find in the typical American home.

After just a quick glance at some of the numbers, one thing jumped out. Affordability. Housing data in the past couple months has elicited numerous articles declaring the rebound of the housing market. And it’s true that across the country, many metro areas have seen steady improvements in prices and market conditions. With low prices and low interest rates, we frequently hear the advice that there is no better time to buy a home.

While that may be true, if you take a closer look at those detailed tables mentioned before, the distribution of both owners and renters paying a higher proportion of their income has shifted slightly. And not in a good way.

Housing affordability is very often measured as a percentage of monthly income. In fact, that’s the barometer used in programs like HAMP designed to bring payments down to an affordable level a percentage of monthly income. From 2009 to 2011, the number of people paying less than 30 percent of their income on housing fell from 60.2 percent of the population to 58.6 percent. That number surprisingly fell for both owners and renters at a time when buying is considered so affordable.

The bottom line is ultimately that wages have not kept up with the cost of either renting a home or buying a home. Weak job and economic growth will continue to limit the rebound of the housing market, and pending regulations (QM, QRM, & Basel III) will likely make lending so tight that affordable homeownership will remain only a dream for many. 60.5 percent of renters (who often have lower incomes) paid more than 30 percent of their income on rent in 2011, and in many places costs will only continue to rise.