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Homeownership Escapes Low Earners

According to a study released by Zillow, low income and rising home values have made homeownership unaffordable and unattainable for the country’s lowest paid workers. Over the past two years, one-third of Americans have not been able to afford homes due to low wages.  As the housing market recovered, incomes did not.

According to the report, much of the problem stems from a significant imbalance in income and home values. Incomes among the lowest third of U.S. workers have risen 15 percent since 2000, while home values are up 41 percent since then.

Even if they are shopping for the least expensive homes on the market, Americans who are working for the lowest wages cannot afford to buy. Low earners are forced to dodge the housing market and continue to pay rising rental costs, making the chance to buy a home slimmer.

Those who make medium to high incomes are able to take advantage of low interest rates and still-recovering home values which make homeownership more affordable, but lower income Americans cannot because their incomes have not kept up with home value appreciation.

"This is a striking example of growing income inequality in America, as upper-tier incomes grow sufficiently to keep even very expensive homes affordable for the well-heeled, while wages among the working class increasingly fail to support the purchase of even the most modest homes," Dr. Stan Humphries, Zillow Chief Economist said. "At the same time, rising rents and stagnant wages are also making rental housing increasingly unaffordable.

Also in the report, Zillow found that while all incomes have some difficulty with purchasing homes, those in the bottom third are falling further behind in affordability because they have spent a larger percentage of their incomes on house payments. The amount that lower income earners can expect to purchase a home with has increased significantly in the past two years, while it has not changed for those who make more money.

The report assumes low wage-earners would shop for the least expensive homes, while high wage-earners would shop for the most expensive homes.

High-earning home buyers are able to buy in all but four home markets, while low-earning home shoppers would expect to find even the least expensive homes unaffordable in 77 markets.

The bottom third of wage earners are completely pushed out of hot housing markets, like Los Angeles, where they would have to spend 85 percent of their monthly income on a low-priced home. Those in the middle third of incomes would have to spend 41 percent. Those in the top tier would pay an average of 30 percent.

“It is imperative that we find ways to create both meaningful wage growth for all workers, and increase the supply of affordable housing, and soon,” Humphries said.  “If not, we run a real risk of the working class in America running out of affordable housing options, either to rent or to buy."

 

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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