One of the things that allow us to live within our means is cheap housing ~ courtesy of small university town (it’s growing larger by the hour, but it’s still small compared to some bigger cities around). I was trying to see how our housing expenses compare to other Americans , but couldn’t find useful data for renters (I was looking for average rent as a percentage of income). However, I got some interesting data on homeowners and their housing costs. According to an article on MSNBC:
Nationwide, homeowners spent nearly 21 percent of their incomes on housing costs last year, up from just under 19 percent in 1999.
Here is a comparison between our costs and the average homeowner’s cost as a fraction of income:
So that looks good for us about now. We have about 89% of our income to spend on other things (like savings and stuff)
The term “housings costs” include mortgage payments, taxes, insurance, and utilities. In our case (we live in a small rental apartment), it includes rent and utilities [the article does not mention whether it's *net* income or *gross* income; I have assumed gross household (me + wife) income in my calculations].
In the report, the state with lowest percentage of income spent on housing is West Virginia…and that’s still 15.4%. Whereas, average homeowners in California top the list by spending 25.4% of their income.
What percent of your income do you spend on your housing costs? Do mention whether you rent an apartment or own a home. (assume gross income)
I think it’s obvious that most people who rent will be spending less on housing costs than people who own homes (there will be exceptions, but generally this will be the case).
However, I do have a nagging doubt - when a homeowner makes mortgage payments, he/she has a share in the payment in the form of increasing equity. So, I am not completely convinced that mortgage payments are pure *costs* (although higher mortgage payments do reduce your discretionary income and lower your buying power). This is unlike renting an apartment - the renter does not have any form of share in the rent. I am not sure how this issue can be addressed; any thoughts on this?
Here are some other interesting titbits from the MSNBC article.
- New Jersey had the highest monthly housing costs for homeowners, at $1,938.
- West Virginia had the least expensive monthly costs for homeowners, at $797.
- Hawaii had the highest monthly costs for renters, at $995.
- North Dakota had the lowest monthly costs for renters, at $479.
- Mississippi had the least expensive median home value, at $82,700.
- Among America’s 15 largest cities, San Francisco had the most expensive homes, with a median value of $726,700. Detroit had the least expensive, at $88,300.
- San Diego had the biggest increase in median home values from 2000 to 2005, going from $249,000 to $567,000.
Man, we are pretty close to North Dakota when it comes to renting costs.