Considering the collapse in home prices in 2007 and 2008, you might think that housing would have gotten more affordable. You would be wrong.
More Americans found housing unaffordable last year, even though home prices across the U.S. have taken a major fall. More than 40 million spent 30% or more of their household income on housing costs, 600,000 more than in 2007, according to 2008 Census data released Monday. That includes homeowners with and without mortgages, as well as renters.
From 2007 to 2008 the homeownership rate fell more than half a percentage point, to 66.6% — the lowest level since 2002, says Mark Mather, a vice president at the Population Reference Bureau in Washington, D.C.
Many of those former homeowners have become renters, a segment feeling the brunt of steep housing costs. About half of renters spend at least 30% of their before-tax pay for housing.
Overall, the number of renters swelled by nearly 900,000 in 2008 compared with 2007. In the same time, renters stretching financially to make their rent rose by 601,000.
The new Census data show affordability remains difficult in many states, even in those hard hit by foreclosures and falling home values. Median housing costs for owners with mortgages, after adjusting for inflation, increased in 2008 from 2007 for nine states and decreased for eight states.
That's partly because existing homeowners aren't receiving the benefits of cheaper housing. They are often stuck in their properties, owing more than their homes are worth but unable to find a buyer.
Unless you are in the inflating portion of a speculative bubble, then affordability is key. With rising foreclosure rates and negative equity spreading across the board, bankruptcy filings approaching an all-time high, a falling rate of affordability dooms any talk of a bottom in housing.
It's just another sign that the housing bust still has a very long ways to go.