1 In 5 Americans Are Making Big Sacrifices to Afford Monthly Housing Costs

 A new report from Redfin highlights the sacrifices Americans are making to afford their monthly housing costs. Redfin commissioned the survey conducted by Qualtrics in February and fielded to 2,995 U.S. homeowners and renters.

Redfin’s report zooms in on the 1,494 respondents (49.9%) who said they “sometimes, regularly, or greatly struggle” to afford their monthly rent or mortgage payments.

Redfin asked these respondents, “Which of the following, if any, changes or sacrifices did you make in the past year to afford your monthly housing costs, including mortgage or rent, insurance, parking, heating/cooling/electricity or homeownership association dues?”

For starters, about 1 in 5 have skipped meals (22%) and/or worked additional hours (20.7%) to bridge the gap, while 17.9% borrowed money from family or friends, and 15.6% have put medical treatments on hold.

The most common sacrifice among white and Asian/Pacific Islander respondents was skipping vacations. Black respondents were most likely to put in extra hours at work.

Americans of all generations are even dipping into their retirement savings to afford housing.

Overall, the most common sacrifice made was vacation time, with 34.5% saying they skipped vacations in the past year to afford their monthly housing costs.

Housing has become so financially burdensome in America that some families can no longer afford other essentials, including food and medical care, and have been forced to make major sacrifices, work overtime and ask others for money so they can cover their monthly costs. Fortunately, the country’s leaders are starting to pay attention, and homebuyers may get a reprieve in June if the Federal Reserve cuts interest rates, which would bring down the cost of getting a mortgage. - Chen Zhao - Redfin Economics Research Lead 

13.5% OF MILLENNIALS USE RETIREMENT SAVINGS TO AFFORD HOUSING PAYMENTS

A surprisingly large share of millennials (13.5%) have dipped into their retirement savings to afford housing, though boomers were most likely to do this (27.5%), followed by Gen Xers (15.5%).

At 6.5%, Gen Zers were least likely to do so as few of them even have retirement savings.

By the numbers, millennials are the largest adult generation, and many are becoming homeowners at a time when both mortgage rates and home prices are high. The income needed to afford even a modest starter home has gone up 8% from one year ago, making many of today’s younger buyers more reliant on family money to cover their down payment.

Boomers struggling with their monthly housing costs were most likely to dip into retirement savings, which makes sense as many of them are already retired, and it’s not unusual for retirees to put retirement funds toward housing.

Typically, the IRS taxes people who withdraw money from their retirement accounts before they turn 59.5, but it makes an exception for qualified first-time homebuyers, allowing them to borrow up to $10,000 tax-free.

Breaking it down by race/ethnicity, white respondents who struggle with housing costs were most likely to use retirement savings (20.7%), followed by—

• Asian/Pacific Islander respondents (14%)
• Hispanic/LatinX respondents (13.6%)
• Black respondents (12.6%)

BLACK RESPONDENTS ARE MOST LIKELY TO WORK MORE HOURS TO AFFORD HOUSING

While skipping vacations was the most common sacrifice across generations, it wasn’t the number one choice for every demographic. People of color and those of younger generations often made more difficult sacrifices.

Black respondents who struggled to afford housing expenses were the most likely to say they worked additional hours (25.9%) to keep a roof over their heads, while Hispanic/LatinX respondents were most likely to say they sold belongings (28.2%) to afford housing.

Among Asian/Pacific Islander (43.8%) and white respondents (39.6%), skipping vacations was the most common sacrifice made.

Breaking it down by age group, among those struggling to afford housing, taking no (or fewer) vacations was the most common sacrifice for—

1. 42.8% of baby boomers
2. 36.8% of Gen Xers
3. 31.3% of millennials

Meanwhile, for Gen Zers, the most common sacrifices included the following, all of which clocked in at about 27%:

1. Working extra hours
2. Selling belongings
3. Skipping meals

Also, the racial homeownership gap still impacts minorities across all generations, with Black millennials half as likely as white millennials to own homes.

Keep reading to see how this issue compounds the problem for non-white Americans.

MOST LIKELY TO AFFORD HOUSING EASILY: WHITE RESPONDENTS, BOOMERS, AND HOMEOWNERS

About half (50.1%) of the roughly 2,995 people who took the Redfin survey said they can “easily afford” their monthly rent or mortgage payments, while another half (49.9%) said they “sometimes, regularly, or greatly struggle” to afford housing.

Those results vary by demographic.

More than half (54.5%) of white respondents said they can easily afford their monthly housing costs, compared with—

• 37.8% of Hispanic/LatinX respondents
• 46.6% of Black respondents
• 47.4% of Asian/Pacific Islander respondents

At 61.9%, baby boomers were most likely to say they have no trouble affording their monthly rent or mortgage payments (plus other housing costs), followed by—

• Gen Xers (48.7%)
• Millennials (40.2%)
• Gen Zers (26.9%)

And here’s the kicker: homeowners (59.9%) were almost twice as likely as renters (30.8%) to say they could easily afford their monthly housing costs.

Considering baby boomers are more likely to be homeowners than renters, it’s not surprising they’re also the generation best able to afford housing. Among generations, Gen Z is least likely, owing to their age.

And among racial/ethnic groups, non-white Americans are less likely than white Americans to own a home, due to discrimination and racist policies that persist even as they grow older.

Key Details: 

• According to a new Redfin report, roughly half of all Americans are struggling to afford housing payments, with 1 in 5 making big sacrifices to cover the costs—including skipping meals, working extra hours, and delaying medical care. 
• Boomers who struggle to afford housing are most likely (27.5%) to dip into retirement savings, followed by Gen Xers (15.5%), millennials (13.5%), and Gen Z (6.5%)
• Skipping vacations was the most common sacrifice across all generations, but Black and Gen Z respondents were most likely to work extra hours, while Hispanic/LatinX respondents were most likely to sell belongings. 

Posted by Sarah Lentz | Apr 10, 2024 | Housing Market

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