WASHINGTON, Jan. 19, 2009
The Unequal Financial Burdens Of Ownership
Race, Education Major Factors Among Homeowners With Unaffordable Mortgages
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Joel Cazares, outside his Visalia, Calif., home, and his wife have spent months awaiting word on a loan modification, which they hope will bring their payment down from $2,500 to a more manageable level of around of $1,500. (AP Photo/Gary Kazanjian)
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Inequality in America has traditionally followed familiar patterns of race, age and education. Those long-standing gaps have been magnified by the real estate boom and now the historic bust, according to an Associated Press analysis of 2007 Census Bureau data.
While minorities have made significant gains in wealth and home ownership since 1990, "things are going into reverse gear," and now the homeownership rate for blacks and Hispanics is falling, said Edward Wolff, a New York University economist who studies income and wealth distribution.
Nearly 9.5 million households, or nearly one out of every five of the nearly 52 million homeowners with a mortgage, spend 38 percent or more of their pretax income on their mortgage payment, property taxes and insurance, the AP's analysis found. That's the new threshold to qualify for the loan assistance program launched last month by Fannie Mae and Freddie Mac, the mortgage finance companies now under government control.
Not surprisingly, the most financially burdened are in California, Florida, Nevada and the Northeast, areas hardest hit by soaring home prices and now foreclosures.
Yet in every state, there are many pockets of homeowners who are just one unexpected medical bill or car repair from falling behind on their mortgages and setting the foreclosure clock ticking.
The AP's analysis reveals the enormous scope of the U.S. housing market bust and how unevenly the burdens are spread, both geographically and demographically. And the situation is worsening - a record 10 percent of U.S. homeowners with a mortgage are at least one payment behind or were in foreclosure as of last fall, compared with 7.5 percent a year earlier and just under 6 percent in 2006.
The burden is clearly more arduous among minority households, the AP analysis found.
Just under a third of Hispanic homeowners spend at least 38 percent of their income on housing expenses, compared with about a quarter of Asian and black households and nearly 16 percent of white households.
In much of the country, the trend is more pronounced. For example, included among those who spent at least 38 percent of their income on housing are:
Many Latino families wound up with expensive subprime mortgages because they often have cash income and no bank account, said Janis Bowdler, associate director for wealth building at National Council of La Raza in Washington.
It is common for Latino families to have stable incomes, but limited credit histories - and hence lower credit scores, which lenders use to gauge risk. Many have multiple sources of income, some of it in cash.
During the housing boom, consumer advocates say it was both faster and more profitable for mortgage brokers and loan officers to put Hispanic families in loans that didn't require proof of income, but charged higher interest rates.
"They had them out the door in a fraction of the time," Bowdler said. "They were definitely getting more expensive loans."
Now, Hispanic households like the Cazares family of Visalia, Calif are caught up in the mortgage crisis. Out of work for more than a year after contracting a rare disease caused by an airborne fungus, Joel, 36, brings in $550 a week in disability payments. His wife Maria, 34, makes about that much money weekly by working as a hair stylist.
They haven't made their $2,500 home loan payment in four months. The couple, who have three kids, have been waiting since October for a loan modification from IndyMac Bank, which was seized by the federal government last July. They hope it will bring their payment down to a more manageable level of around of $1,500.
In the meantime, they buy supersized bags of generic cereal to make ends meet. They've canceled their Internet service and are only using one of their two cars, a pickup truck, because it gets better gas mileage.
"Our money's like a piece of gum," Joel Cazares said. "We're making it stretch as far and as long as we can."
The AP's analysis also found that education level is highly correlated with income and mortgage expenses. Nearly one in three of those without a high school or college diploma spend at least 38 percent of their income on housing, compared with only 12 percent of those with advanced degrees, the AP analysis found.
In addition, seniors spent a far higher share of their income on housing than any other age group.
While about half of seniors own their homes outright, the other half often face financial challenges and diminished earning potential.
Among seniors with a mortgage, nearly three in 10 spend at least 38 percent of their income on housing, according to the AP analysis. The stress is most severe in nine states: California, Washington D.C., Florida, Massachusetts, Nevada, New Jersey, New York, Rhode Island and Vermont.
By AP Real Estate Writer Alan Zibel; AP Data Specialist Allen Chen contributed to this report.
© MMIX The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Add a Comment See all 63 Comments
- Also, do not buy or spend what you cannot afford to pay cash for. I bought my home 10 years ago, I am on an ARM but I read the paper work thoroughly. My rate has a cap, which it has never reached, cannot go up more than 2 points or down 2 points in a year. I made sure my payments would always been within a range I could afford. Sure enough I lost my job 3 1/2 years after I bought my home. I have been able to keep it because I didn''t feel I had to impress anyone. Two of my children, including the one that lived in CA have followed that rule. Both have nice homes, nothing extravagant but comfortable and easily managed house payments.
Also as stated by someone earlier, if you don''t understand the terms ASK. If the loan officer won''t give you an answer, DON''T sign the paper. There are very strict Truth in Lending laws in this country and a bunch of greedy people out there that will take advantage if they can. - Reply to this comment
- One of my sons lived in CA for a few months, he made an incredible amount of money while there but told us the cost of living was outrageous. Fellow Americans, the only way this will stop is when we, the people, the wageearners REFUSE to play this stick it to us game.
Gasoline prices have gone down because we cut back, diesel is still high because, diesel is what the big trucks use to transport our goods. The price of cattle is WAY Down for the producer (the farmer) but not in the grocery stores.
Look at the labels when you buy your housewares, linens, clothes, if it is made overseas don''t buy it.I have gone back to making my curtains, comforters, toss pillows because I am tired of my money going overseas. Americans go back to becoming self sufficient, we are the only nation on this planet that has that capability. We stop playing the game corporate America has tossed at us and we will win. Go to your small businesses for as much as you can. Buy your meat at a meat locker, plant a garden, during the growing season go to your local farmers market. Besides it is healthier anyway. - Reply to this comment
- I sor of laugh when I see the young folks go out and make the 0 $ down payment and thing it will be okay as the money will come from some where to make the payments for the next 40 years or so.
They then high tailit to the car show room and buy the biggest car they can find with all the bells and whistle and think it is great than in 4 or 5 months they figure out those tackie monthly notes just keep coming and if the have a ARM they then notice the notes get larger and larger. The home owners tax go up ever year aboyut 10 or 15% for 800 or 900 $ in year one which is cut short due to the month puchased to 15 or 1600 $''s in year two.
Then they wnat the tax payers who purchase a house they could afford and pay for to pay for theirs.
The only that are catching haddies are the poor black and poor white. As for the criminal Illegal hispanic I have no sympthy what so ever the anchor babies they are having is costing me the school and the freebies they get even being illegal is beyond the average tax payer.
An illegal woman and man can have 5 or 6 kids in 6 years and each child cost 12,000.00 up for the delivery alone and they have no means to pay for it so we do. So I SAY TO THE HISPANIC JUST LEAVE AND GO BACK TO WHERE EVER YOU CAME WE DO NOT NEED YOU NOR DO WE WANT YOU.
The best of good byes to the CITIZENS only, from Frank Bowers of Austin, TX - Reply to this comment
- ...although any health catastrophe will wipe out any good citizen these days.
So---starter homes are pretty expensive, too, but if you can''t afford to buy one, it is best not to buy one.
Posted by mollydtt at 03:48 PM : Jan 20, 2009
Ummm...does "health catastrophe" include a mismanaged economy that is so sick that it is hemorrhaging even those jobs that could not, for one reason or another, be off-shored to lower wage nations for higher corporate profits, fatter dividend checks, and ever more glittering CEO salaries and golden parachutes?
''Cuz that is the real state of the real estate of the "American Homeowner"....ever closer to default through no fault of the own, whether the homeowner knows it yet, or not. - Reply to this comment
- Owning a home is a big financial risk---for anybody. Sadly, homes are expensive, the taxes on those homes are expensive, and home ownership not for the faint of heart or the financially challenged.
More than sadly, a huge number of people feel they deserve to own a home they can''t afford. Why not--everybody else has a home. I aimed low, bought a house that most people would not have wanted to buy, but I knew I would be able to make the payments, although any health catastrophe will wipe out any good citizen these days.
So---starter homes are pretty expensive, too, but if you can''t afford to buy one, it is best not to buy one.
And if you are lucky enough to be able to afford to buy a home, you buy it to live in forever, not to flip. - Reply to this comment
- When folks take on more than they can handle, that is irresponsibility!
------------------------------------------------------Posted by notopennshut at 02:35 PM : Jan 20, 2009
They bought the house when he did have a good paying job, before he was struck down by a mysterious disease. That isn''t irresponsiblity! Plus, as a California resident, $4000 a month doesn''t cut it. Our cost of living is way out of control around here and getting worse by the minute - Reply to this comment
- Personal responsibility does not apply to the stupid, minority, and poor homeowner, contrary to what Obama just said. If you don''t understand something, get someone who does. You don''t buy something without reading the contract. When I bought my first house, I spent 2 hours reading everything and got explanations for everything.
- Reply to this comment
- When folks take on more than they can handle, that is irresponsibility! With what is is collecting through disability, and his wife''s income, that is almost double what many others in this country are earning through full-time work. Look at the home behind him - was it wise to take on a mortgage on this home? What about smaller, less ostentatious starter homes, where the mortgage would certainly be less? Why should the rest of us help support his mortgage payments when we are going through hard times ourselves? Who will help him if this kind of "help" runs out after 6 months?? He would be again where he now is, so why pour in more "good, after the bad"? Sometimes, these folks will just have to accept that they cannot afford these huge debts that they have taken on, and opt for a right and correct resolution rather than to continue on a hopeless cause. It''s time to face reality and not overreach especially when there is no end in sight.
- Reply to this comment
- So where is personal responsibility in all of this? The libs always blame someone else, but one should not buy what one cannot afford! It doesn''t matter if you''re a minority or poorly educated. What a stupid story.
Posted by renojmc at 12:00 PM : Jan 20, 2009
The fact is that due to inequitable free trade and trickle-down economics, the ONLY way to comply with those such as you who continually demand "personal responsibility" is to pay cash for housing.
But you will not see that - you will not see that the adverse factors affecting America, ranging from soaring expenses caused by artificial manipulation of the energy markets to the end of the expectation that long and loyal service to a business would yield steady pay raises and a pension (both now replaced by wage stagnation and declines and pensions that disappear simultaneously with the deploying of golden parachutes) have crushed the ability of the average American to project into the future far enough to safely sign a mortgage.
Such as you endlessly preach "personal responsibility" but take no responsibility for destroying the American Dream.
(Your edit box is too teeny, CBS...or my mind is too ADHD to recall what just scrolled up when I write.) - Reply to this comment
- So where is personal responsibility in all of this? The libs always blame someone else, but one should not buy what one cannot afford! It doesn''t matter if you''re a minority or poorly educated. What a stupid story.
Posted by renojmc at 12:00 PM : Jan 20, 2009
The fact is that due to inequitable free trade and trickle-down economics, the ONLY way to comply with those such as you who continually demand "personal responsibility" is to pay cash for housing.
But you will not see that - you will not see that the adverse factors affecting America, ranging from soaring expenses caused by manipulation of the energy markets to the end of the expectation that long and loyal service to a business would yield steady pay raises and a pension - and indeed, wage stagnation or declines - have crushed the ability of the average America to project into the future far enough to safely sign a mortgage.
Such as your endlessly preach "personal responsibility" but take no responsibility for destroying the American Dream. - Reply to this comment
- So where is personal responsibility in all of this? The libs always blame someone else, but one should not buy what one cannot afford! It doesn''t matter if you''re a minority or poorly educated. What a stupid story.
- Reply to this comment
- The greed of "Business", "banks", and "the Republicans" is only matched by the myopia of their vision.
- Reply to this comment
- "..among those who spent at least 38 percent of their income on housing"..
Meanwhile, the corporations use the cost of labor in overseas locations where housing is 1/10th or 1/20th as expensive as here in America to pressure the American worker for wage concessions and give-backs.
Gee - do you think the banks will reduce the mortgage payments at the same ratio as Americans are losing income?
(lollll...as if...) - Reply to this comment
- "Unequal Burdens" Duh! The more wealth you have the less the burdens of ownership. This is not rocket science. This is capitalism..... a term strange to those in the MSM.
- Reply to this comment
- Boy, you could see this one coming a mile off. Now we''''ll have to provide mortgage free houses for negroes.
Posted by ken1dall
ken1dall: Are you a troll or an a$$hole -- or both? - Reply to this comment
- My representative in the house voted the way we told him to....NO BAILOUTS. My senators did not, I want them out.
Why do they always have to play the race and class card? Of course these groups got the shaft, they always do. I also noticed that the areas they mentioned are areas where the cost of living is high. We have lots of foreclosures here too, but I maintain that the mortgages were all on paper and anyone who failed to read the terms of their mortgage is now getting a lesson in credit, albeit a hard one. Just because you can get a loan it does not mean you should..... - Reply to this comment
- This is not the first time banks engaged in preditory lending... the whole "Truth in Lending" law was to stop this sort of ***. It''s just that the Republiscum cannot stand disclosure.
- Reply to this comment
- These people took out loans they couldn''''''''t afford and they and their loan agencies knew it before hand. The U.S. taxpayers owe these folks NOTHING! It may sound cruel, but just imagine what nature does to it''''''''s stupid animals in the wild...nuff said!
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Posted by Albo58 at 08:12 PM : Jan 19, 2009
O agree, but shoudlnt we apply the same logic to the stupid banks and investment crock-houses that got all that bailout money???
Capitalism is supposed to be self-correcting, and we are *** up the system by trying to "fix" everything..
The bankers, the homeowners, they all played games and lost.. Let em lose!
Its good for the economy in the long run to burst flimsy bubbbles and purge bad business practices; small scale and large.. - Reply to this comment
- 2500$ mortgage?? Are these people totally NUTS?!?!?
What is it a six bedroom house?!?!!?
They had no business qualifying for this loan, the bank is a thief, and the people are either dumb or liars.. - Reply to this comment
- "Inequality"?????
"Inequality"????????
What the heck is this article talking about?
Anyone who chooses to can go and try to get a mortage..
What does "equality" have to do with anything?
If they cant afford it, duh, its because of their income, not their social class.
IE., they should have gotten a mortgage that was properly sized to their income (and thus a house properly sized to their income) like anybody else with good sense..
If I make 1980 $ a month, Im sure as hell not going to try for a 1000 mortgage, and no sensible bank would give me one.. - Reply to this comment
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