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Renters faced challenges, with 46% spending 30% or more of their income on housing in 2020, meeting the Department of Housing and Urban Development's definition of being "cost-burdened." Over the past five years, average rent in the U.S. increased by 18%, surpassing inflation rates in all regions except the Northeast. From February 2020 to February 2022, rents increased by 6%, while inflation was at 10%, indicating the economic strain on renters.

Renters, often concentrated in lower-income brackets, accounted for 61% of those in the lowest income quartile in 2019, according to Federal Reserve data. Additionally, 88% of individuals with net worths below the 25th percentile were renters. This highlights the economic disparities in homeownership and renting patterns across different income and wealth brackets.

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A "For Rent" sign is posted near a home in Houston in February 2022. (Brandon Bell/Getty Images)

A rising share of Americans say the availability of affordable housing is a major problem in their local community. In October 2021, about half of Americans (49%) said this was a major problem where they live, up 10 percentage points from early 2018. In the same 2021 survey, 70% of Americans said young adults today have a harder time buying a home than their parents' generation did.

A variety of factors have set the stage for the financial challenges American homeowners and renters have been facing in the housing market, including incomes that haven't kept pace with housing cost increases and a housing construction slowdown. A surge in homebuying spurred by record low mortgage interest rates during the COVID-19 pandemic has further strained the availability of homes.

Here are some of the key measures of the housing affordability crunch in the United States and the reasons behind it.

This Pew Research Center analysis about housing affordability in America draws from Center surveys designed to understand Americans' views and preferences for where they live. It also uses outside data from sources including the Federal Reserve Bank and the U.S. Census Bureau.

Everyone who took the Pew Research Center surveys cited is a member of the Center's American Trends Panel (ATP), an online survey panel that is recruited through national, random sampling of residential addresses. This way nearly all U.S. adults have a chance of selection. The survey is weighted to be representative of the U.S. adult population by gender, race, ethnicity, partisan affiliation, education and other categories. Read more about the ATP's methodology.

Rising demand for housing meets limited supply

As home sales have boomed, active housing listings have dropped and the median home sale price has surged, according to data from the Federal Reserve. The number of active housing listings in the U.S. was at its lowest in at least five years in January 2022, with 408,922 active listings on the market. That's a 60% drop from about 1 million listings in February 2020, just before the coronavirus recession hit the U.S.

Around the same time, the national median sale price for a single-family home jumped 25% from $327,100 in the fourth quarter of 2019 (the last full quarter unaffected by the COVID-19 recession) to $408,100 in the fourth quarter of 2021, the most recent data available. The greatest increases were in the West, Midwest and Northeast.

Housing vacancy rates, meanwhile, have dropped over the last decade. The vacancy rate for rental units fell from about 10% in 2010 to 5.6% at the end of 2021. The rate for homeowner units is down from about 2.6% in 2010 to 0.9% in 2021 (the most recent year with available data).

Housing availability has been squeezed by a near-record increase in the number of American homeowners in 2020, a Pew Research Center analysis of U.S. Census Bureau data found. There were an estimated 2.1 million more homeowners in the fourth quarter of 2020 than there were a year earlier, equal to the previous record increase in homeowners, which occurred during the housing boom between 2003 and 2004.

During 2020, the U.S. homeownership rate also increased to 65.8%, up from 65.1% a year earlier - a large year-over-year change, but still below the historical peak of 69.2% in 2004. The homeownership rate in the fourth quarter of 2021 (65.5%) was not statistically different from the rates in the fourth quarter of 2020 (65.8%) and the third quarter of 2021 (65.4%).

Homeownership among households headed by White Americans rose an estimated 0.8 points from 2019 to 2020 - the only racial or ethnic group to see a statistically significant increase during that time. (Homeownership rates did not significantly increase for any racial or ethnic group between 2020 and 2021).

In the fourth quarter of 2021, 74% of White adults owned a home, compared with 43% of Black Americans and 48% of Hispanic Americans. These disparities in homeownership have persisted over decades.

Renters are feeling the strain

In 2020, 46% of American renters spent 30% or more of their income on housing, including 23% who spent at least 50% of their income this way, according to the most recent data available from the U.S. Census Bureau. This meets the Department of Housing and Urban Development's definition of being "cost burdened." Although spending 30% of income on housing has long been considered the most a household should spend in order to have money left over for essentials, some researchers have argued this housing affordability measure should be adjusted to reflect changes in the cost of other necessities, types of households and other factors.

Renters across the U.S. have seen the average rent rise 18% over the last five years, outpacing inflation, according to consumer price index data from the Bureau of Labor Statistics. Between 2017 and 2022, the cost of all goods and services increased by 16% due to inflation. During that span, the growth in rent prices exceeded inflation in every region but the Northeast: The average rent rose 21% in the West, 20% in the South and 18% in the Midwest. Rents were up 12% in the Northeast during that time.

From February 2020 to February 2022, rents were up 6%, compared with a 10% inflation rate amid loosening coronavirus restrictions.

Renters tend to skew toward the lower ends of the economic scale when it comes to income and wealth, according to data from the Federal Reserve's 2019 Survey of Consumer Finances. That year, about six-in-ten Americans in the lowest income quartile (61%) rented their homes, as did 88% of people with net worths below the 25th percentile. People with lower incomes or net worths were more likely to be renters: Only 10.5% of people in the top income quartile, for example, were renters.

Younger Americans and those who are Black or Hispanic are more likely to be renters, according to an August 2021 Pew Research Center analysis of U.S. Census Bureau data. Roughly a third of U.S. households (35%) were headed by renters in 2021, the last year for which the U.S. Census Bureau has reliable estimates. Households headed by Black or African American adults are more likely than the population overall to rent their homes (57% rent), along with 52% of Hispanic- or Latino-led households. Around a quarter of households led by non-Hispanic White adults (26%) rent.

Americans younger than 35 are far more likely to rent than those in older age groups: 62% of this age group lives in rentals compared with 39% of those ages 35 to 44, and 30% of 45- to 54-year-olds.

Looking ahead, Americans anticipate continued rent increases in 2022, according to the Federal Reserve Bank of New York's Survey of Consumer Expectations. Americans expect that rents will increase by 10% this year - that's larger than the expected increase in price for any other commodity, including food (9.2%), college education (9.0%) and gas (8.8%).

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Key facts about housing affordability in the U.S.

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Here are some of the key measures of the housing affordability crunch in the United States and the reasons behind it.

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How much do renters pay now? How has this changed over time?

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-The White House document highlights the influence of economic factors on the housing market while discussing the connection between inflation and housing prices.

-It probably offers perceptions on how the economic policies of the US government affect housing availability and offers insights into those policies.

-The source offers a complex analysis that takes into account a number of economic variables and legislative measures that affect the dynamics of housing prices.

-Since it's a government publication, it might have exclusive information and analysis that aren't easily found elsewhere, adding to our understanding of the housing situation as a whole.

-Readers should be aware of potential political perspectives that could affect how the facts are presented in the document, even though they offer insightful information.

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A great resource for learning about housing availability is the White House's "Housing Prices and Inflation" page. First off, it probably offers perceptions into the views and economic strategies of the US government, which affects the whole housing market. The source clarifies the complex relationship between economic issues and the housing market by discussing the relationship between home prices and inflation, which helps us better understand the forces at work. Being a government publication, it may also provide exclusive access to data and analysis that are not easily found elsewhere, improving knowledge of the housing situation as a whole. It is anticipated that the source will offer a balanced analysis, taking into account different economic data, government regulations, and how these affect the supply of homes. As a high-level document, it could set national economic strategies that affect housing policies in context and point readers in the direction of a more thorough comprehension of how the overall state of the economy affects the supply of housing. Nonetheless, it's imperative to approach the data aware of possible political stances influencing the way the facts are presented.

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The White House is often regarded as a reliable and authoritative source, and the source it provided on "Housing Prices and Inflation" looks to be an academic work. A focus on economic policy appears in the discussion of the relationship between inflation and home prices in the text. Considering where it came from, the writers are probably politicians and economic specialists connected to the Council of Economic Advisers. Expect an advanced level paper with a thorough analysis of the economic issues impacting home prices, aimed at policymakers, economists, and academics. Given the variety of economic data and policies taken into consideration, the content is likely to offer a complex perspective. Despite not going through the conventional peer-review process, this government publication goes through a thorough internal review process.

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By Jared Bernstein, Ernie Tedeschi, and Sarah Robinson

The pandemic has seen extraordinary growth in home values. Pandemic-related market disruptions, like increased demand and rising building costs as well as other long-term supply constraints in the housing market have contributed to record increases in prices. Over the last 12 months, the Case-Shiller U.S. National Home Price index has risen by 18.6 percent, the strongest year-long growth in the history of the series. Other third-party indices show similar rises (Figure 1).

Meanwhile, asking rental prices, as measured by the Zillow Observed Rental Index (ZORI), initially fell during the pandemic but have since recovered and now exceed their pre-pandemic trend (Figure 2).

Because of the way shelter costs enter into the CPI, these increases in owned home and rental costs have not yet contributed much to overall inflation.

Our analysis, however, suggests that these higher shelter prices are likely to soon show up more clearly in the monthly CPI, potentially adding several more basis points (hundredths of a percentage point) to monthly inflation than they do now. As we show, some of this acceleration would simply represent a return to the normal pre-pandemic shelter contributions to inflation, and we note that these housing price dynamics are included in inflation forecasts, including our own, which show overall price growth decelerating in coming quarters.

The pandemic has seen higher-than-normal volatility and uncertainty in the economic data; so, while included in our analysis, we also recognize that historical relationships between housing prices and CPI may not hold in these unprecedented economic times.
What factors have contributed to rising home prices?
As with most economic variables, demand growth and supply constraints can act in tandem to boost home prices. In a recent blog post, CEA outlined some of the longer-run issues affecting U.S. housing supply that have been present for years, including local zoning restrictions and limited affordable or public housing (the post also details a robust set of near- and longer-term Biden Administration policies intended to boost supply). The pandemic has prompted more recent supply issues as well, driving the prices of key commodities to record highs and increasing the cost of home construction. For example, lumber prices increased 114 percent over the 12 months ending in May 2021-the highest 12-month growth for which there are data. Similarly, in June, prices of iron and steel had increased by 73 percent over the prior 12 months. However, between June and July, lumber prices declined by over 20 percent, indicating that some of the price pressures are easing (Figure 3)

In addition to supply factors, there are also potential pandemic-related demand factors stemming from increased at-home work and heightened mobility. At the start of the pandemic, there were elevated levels of migration away from city centers and into suburbs and other less population-dense areas. This created higher than usual churn in the housing market. Moreover, mortgage rates -which have declined to all-time lows over the past year-are making borrowing more affordable (for those with relatively good credit histories), thereby contributing to stronger demand for new homes.

Taken together, these dynamics mean the wedge between supply and demand has widened. According to Redfin, the seasonally-adjusted inventory of homes has declined by over 50 percent since February 2020. Other measures find similarly large declines. For example, the Census Bureau estimates that the inventory of for-sale homes has declined by 37 percent since 2019Q4.
What is the relationship between housing prices and CPI inflation?
Rising home prices have direct effects on household wealth and neighborhood affordability. They also play an important role in overall inflation. The Consumer Price Index (CPI), for example, measures the prices of a basket of household goods and services that households regularly consume, with weights assigned to each item in the basket based on their average shares of total expenditures. Among these is a shelter component that includes both rental costs and the consumption value of owner-occupied housing, in addition to other forms of lodging such as hotels. Shelter makes up nearly a third of the basket for CPI inflation, and 40 percent of the basket for core CPI that excludes the volatile food and energy components. [1] As a result, even small increases in rent and home prices can, in principle, have noticeable effects on overall inflation.

Understanding how housing affects inflation means understanding what our inflation data tries to measure. The CPI is a cost-of-living index: its purpose is to measure the price of different goods and services that households consume. It is not meant to measure the value of investment assets that families hold, such as stocks.

But this goal creates a unique challenge with owner-occupied housing, because the price of a house reflects both its value as an investment asset, which CPI in principle wants to ignore, and as a good that provides a "service"-shelter-to the families that live in it, whose cost CPI wants to incorporate. Prior to 1983, however, BLS calculated CPI: Shelter based on housing prices, mortgage rates, property taxes and insurance, and maintenance costs. This approach captured elements of both the service flow-the consumption of housing services-and asset investment aspects of housing expenditures. Not coincidentally, during this time house prices tracked closely with CPI: Shelter.[2] Between 1976 and 1985, Case-Shiller and CoreLogic were a strong predictor of growth in the shelter component of the CPI (Figure 4). A 1 percentage point increase in year-over-year growth in Case-Shiller or CoreLogic was associated with a 76 basis point increase in year-over-year growth of CPI: Shelter over the upcoming year (i.e. Case-Shiller 12-month growth from January 1980 to January 1981 was highly predictive of growth in CPI: Shelter from January 1981 to January 1982).[3]

But, BLS decided that the investment component was inconsistent with CPI's role as a cost-of-living index. As a result, after many years of internal debate and testing, in 1983 BLS altered its methodology to the "rental equivalent" approach. Under this framework, owners' equivalent rent (OER) of primary residence is meant to capture just the implicit value of services that homeowners "consume" from their own homes-not the asset value of the house as an investment. It is calculated using a subset of the same rental data as the CPI: Rent index, weighted by the price that homeowners think their home (unfurnished and without utilities) can be rented for monthly. The BLS rationale behind this change was that it would more accurately capture the price of the service homeowners receive from living in their home, distinct from the value of the home as an investment.

Due in large part to these methodology changes, in the mid- to late-1980s the relationship between CPI: Shelter and housing prices weakened. The change to the "rental equivalent" approach lowered growth in CPI: Shelter and made the series less volatile (Figure 5).

Ever since the early 1980s, the house price-CPI relationship has declined due to these changes in the methodology. Between 1985 and 1999, each 1 percentage point acceleration in year-on-year growth in Case-Shiller was associated with a 15 basis point rise in CPI: Shelter 22 months later. Since 2000, that effect has changed to 11 basis points, 16 months later. The story is similar when looking at CPI: OER, with an optimal predictive effect of 15 basis points after 23 months pre-2000 and of 9 basis points after 16 months post-2000 (Figure 6). Since the end of the Great Recession, the magnitude of the impact of housing prices on CPI: Shelter is roughly similar to the full post-2000 sample-around 11 basis points.

Recent behavior and expectations
The implication of this historical analysis is that there is indeed a relationship between housing prices and CPI, albeit one that often only shows up with a lag and, when it does, is not 1:1.

So far, growth of both CPI: Rent and CPI: OER have accelerated from their pandemic lows, as Figures 7 and 8 show. In the case of owners' equivalent rent, its growth in recent months has returned to paces consistent with pre-pandemic years. CPI: Rent, on the other hand, remains below its pre-pandemic pace of growth. Because CPI: Rent captures rents for homes that are both on the market and already occupied, it tends to show less volatility than measures of on-the-market asking rents, like the Zillow index in Figure 2.

There is a risk of some further acceleration in the housing components of CPI in the months ahead, both because of recent home price appreciation and also, as Figure 9 shows, the fact that the level of rental and housing prices in CPI is below its pre-pandemic trend; a renormalization would require a temporary acceleration above the pre-pandemic pace of growth. If, illustratively, CPI: Rent and CPI: OER returned to trend by July 2022, that would imply roughly 13 basis points added to core CPI inflation every month, around 2 basis points more than they typically contributed before the pandemic and 1 basis point more than they contributed in June 2021. By comparison, in June, vehicle-related components of CPI-new and used cars, rentals, and parts- contributed more than 50 basis points to monthly core CPI inflation.

But as with so much data during the pandemic, past relationships are no guarantee of future dynamics, and the risks are two-sided. As input prices resettle to more normal levels and as the pandemic demand dynamics fade, we expect any pressure from housing inflation to eventually dissipate. But there is a possibility that some of the pandemic-era supply and demand factors could linger longer than anticipated, and even when they fade, many longer-term structural issues with housing supply that pre-date the pandemic will remain. By the same token, there is also a possibility that the spillover into inflation could be weaker than implied by prior years. CEA will continue to closely monitor the evolution of prices and its different drivers in the months ahead.

[1] Weights for PCE inflation are the nominal consumption shares as a percent of the total, which can be calculated from NIPA Table 2.4.5U. Despite the fact that the Personal Consumption Expenditure (PCE) price index (the measure most closely tracked by the Federal Reserve) incorporates the CPI: Rent and CPI: OER price indices, housing makes up a far smaller share of PCE inflation, partly because PCE is broader in scope overall and partly because PCE uses a different methodology than CPI for weighting housing. On average, housing is 16 percent of headline PCE and 18 percent of core PCE.

[2] To measure the relationship between housing prices and CPI: Shelter, we run a series of simple bivariate regressions of year-on-year CPI: Shelter or CPI: OER inflation on lagged Case-Shiller growth. We optimize the number of months of lags for each sample period by selecting the coefficient that results from the regression with the highest r-squared value, and control for serially correlated errors using a Prais-Winsten procedure.

[3] The effect is similar using three-month growth rates instead of twelve-month rates.

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Housing Prices and Inflation | CEA | The White House

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By Jared Bernstein, Ernie Tedeschi, and Sarah Robinson The pandemic has seen extraordinary growth in home values. Pandemic-related market disruptions, like increased demand and rising building costs as well as other long-term supply constraints in the housing market have contributed to record increases in prices. Over the last 12 months, the Case-Shiller U.S.

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What government policies or initiatives are in place to address housing affordability concerns?

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The source from nationaldebtrelief.com compares the costs of rural and urban living, focusing on housing expenses. It suggests that rural living generally involves lower housing costs, citing specific examples such as Bozeman, Montana, compared to larger urban areas like New York City. The article briefly touches on additional factors like transportation and healthcare costs. However, readers should approach the information with caution due to the potential bias associated with the source's affiliation with a debt relief company. The lack of a publication date limits the assessment of the data's relevance to current economic conditions. While the article provides insights into the financial considerations of rural and urban living, it oversimplifies the factors involved and does not thoroughly explore other critical aspects such as income opportunities, education, and lifestyle differences. It is recommended to look for additional sources that offer a wider range of considerations for a more thorough analysis.

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The source from nationaldebtrelief.com delves into the comparison of costs between rural and urban living, with a specific emphasis on housing expenses. The article suggests that rural living generally incurs lower housing costs, citing examples such as Bozeman, Montana, compared to larger urban areas like New York City. It briefly touches on additional factors like transportation and healthcare costs, providing a snapshot of the financial considerations associated with these different lifestyles.

However, it's essential to approach the information with a critical mindset, considering the potential bias associated with the source's affiliation with a debt relief company. Unfortunately, the lack of a publication date limits the assessment of the relevance of the data to current economic conditions.

While the article offers specific examples to illustrate its points, it simplifies the considerations to a few key factors, potentially overlooking the broader complexities of rural and urban living dynamics. Additionally, readers should be aware that the source's primary focus is on costs, and other crucial aspects such as income opportunities, education, and lifestyle differences are not thoroughly explored.

In conclusion, this source provides a perspective on the financial aspects of rural versus urban living, particularly in terms of housing costs. However, for a more comprehensive understanding, it is advisable to consult additional sources that offer a broader range of considerations and to consider the potential biases associated with the source.

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The nationaldebtrelief.com article compares the costs of rural and urban living, emphasizing lower housing expenses in rural areas. However, readers should be aware of the potential bias associated with the source, given its affiliation with a debt relief company. The article lacks a publication date, limiting its relevance to current economic conditions. While it briefly touches on factors beyond housing, such as transportation and healthcare, it oversimplifies the considerations, omitting crucial aspects like income opportunities and lifestyle differences. Despite providing specific examples, the source's narrow focus on costs may not fully capture the complexities of the rural-urban dynamic. For a more well-rounded analysis, readers should consult additional sources offering a broader range of considerations.

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People have a lot of opinions, and assumptions, about whether a rural lifestyle or an urban lifestyle is better. The truth is, there are positive and negative aspects to both kinds of living. According to the U.S. Census Bureau, in 2016, the median household income in rural communities was 4% lower than that of urban communities. However, roughly 3% more families in urban areas were living under the poverty line.

The cost of living, earnings potential, and lifestyle differences all combine to make each lifestyle different. Before you decide to buy a farm in the country or get an apartment in Manhattan, it's essential to understand the pros and cons of both lifestyles.

Advantages of urban living

While urban living does get a certain amount of negative attention for its high price tag, it also comes with opportunities and amenities that rural living cannot offer. Urban living offers more options for employment, entertainment, and transportation, and many people feel these positives far outweigh the disadvantages.

Earnings potential

According to Bloomberg, urban areas (both large and small) consistently report earnings higher than the national average. Residents can find higher-paying jobs in urban areas than in rural areas, which leads to higher net worth.

There is also a wider range of job opportunities for workers. Urban areas have long lists of businesses. A rural area will have a more limited list of open job opportunities, and thus a limited amount of earning potential for residents.

Entertainment

Urban areas have a variety of entertainment options. From restaurants and bars to music venues and community events, urban areas have fun activities for everyone. If you're on a budget, urban areas also offer free or low-cost entertainment opportunities. These include:

Festivals

Concerts in the park

Botanical gardens

Open mic nights

Taking advantage of low-cost entertainment can help residents stick to their budgets, and avoid credit card debt while living in a high-cost area. It's important to be careful with your entertainment costs. While large cities do offer many affordable entertainment options, they also offer some of the most expensive entertainment options imaginable!

Better transportation

One thing that cities are well known for is transportation. Many cities of all sizes offer extensive bus routes, trams, and subway systems. These transportation options mean you may not even need to own a car, saving you money on car maintenance, insurance, and gas.

Transportation options may also limit the effect that traffic can have on your day. You can spend your morning commute reading and listening to music instead of sitting in a seemingly endless traffic jam.

Disadvantages of urban living

For all of its advantages, urban living also has disadvantages that potential residents should be aware of. These disadvantages, including a higher cost of living, a competitive job market, and stress, may be enough to dissuade some people from making the move to the big city.

However, for many people, the advantages of living in a city outweigh the disadvantages.

Housing cost

Housing costs are much higher in urban areas than they are in rural areas. This includes the cost of mortgage payments and rent. Since the start of the COVID-19 pandemic, there has been a surge in rent prices in urban areas across the U.S.

There has also been a rise in the price of buying or building a home due to the supply chain issues caused by the pandemic. Whether you're buying a home or renting one in a city, you're going to be paying more than you would have just a few years ago.

The number of people in cities means there's competition for sought-after apartments, and that competition also serves to raise rent prices. You may end up needing to share your living space with other people to lower your housing costs.

Higher food costs

Food costs are another disadvantage of living in urban areas. Your grocery bill will be higher in major cities, and the cost of eating out will have a bigger impact on your budget. Many people in cities live in apartments, so you would be unable to start a garden large enough to significantly lower your grocery bill.

High food costs can negatively impact your ability to pay other bills. This financial strain can cause an increased level of credit card debt as well.

Competitive job market

While an urban area is going to have a more diverse job market with new and interesting opportunities, there will also be more competition. Cities have large populations, which means there are more applicants for your dream job than there would be in a less densely populated area.

The competitive job market can also affect your ability to advance in your career. This level of competition with your coworkers, especially in a large corporate setting, can create a lack of work-life balance.

Stress and mental health

An urban lifestyle is more fast-paced than a rural one. There is more noise, more movement, more people, and more competition. The high cost of living and stressful work environment can lead to debt stress, depression, anxiety, and other health issues.

According to research from the National Library of Medicine, living in an urban environment affects mental health in a variety of ways. Cities have more pollution, more violence, and less social support than less populated areas. These factors can create an unhealthy environment for residents, especially when it comes to their stress levels and mental health.

Advantages of rural living

For many people, rural living conjures up images of farms, ponds, and corn fields. However, every rural community is different, and each has something new to offer its residents.

People living in rural areas enjoy a lower cost of living and lower levels of stress, compared to people living in urban areas.

Lower housing costs

Housing costs, and the overall cost of living, are lower in rural areas than they are in major cities. For example, the median home cost in New York City (population: 8 million) is 72% higher than the median home cost in Livingston, Montana (population: 8,000).

The lower cost of housing puts less financial strain on rural communities, and the low population density means that there is less competition for land and houses.

Lower stress and nature

Rural communities run at a slower pace than large cities. The slow pace, the relatively lower amounts of pollution, and the amount of open and natural space lead to lower stress levels in rural residents.

Researchers at the Yale University School of the Environment claim that time spent in nature can improve your immune system, elevate your mood, reduce stress, reduce anxiety, and lower blood pressure. Rural communities are less developed and have easier access to nature, and these features may lead to many positive health outcomes for rural residents.

Strong community ties

The disadvantages of rural living, such as less entertainment and increased poverty, are actually the forces that contribute to one of rural living's best advantages: strong community ties.

Rural communities have small populations, and everyone tends to know everyone else. There aren't going to be many large concerts, clubs, or five-star restaurants, but the community comes together to create their own entertainment. Neighborhoods will have cookouts, churches will put on plays-the sense of community and connection that is present in small, rural communities is something you can't find anywhere else.

Disadvantages of rural living

As with any other lifestyle, rural living has its disadvantages. It's important to understand these disadvantages before deciding to move to a small town. For some people, the advantages of living in a rural area far outweigh the disadvantages.

Limited job opportunities

Cities are filled with all kinds of businesses that need to be staffed, but small towns are not. Depending on the size of your town, most of the businesses might be located on one street.

If you're interested in moving to a small town, make sure you either have a job lined up, can work remotely for your current employer, or have a decent emergency fund saved up to help you get settled until you can find new employment.

Less entertainment

Small towns are quieter than big cities. For many people, this is an advantage, but if you are moving from a big city, it might be a bit of an adjustment. However, the lack of music festivals and dance clubs doesn't necessarily mean that there is less to do.

Activities like community service, church participation, farmer's markets, and days spent in nature are great ways to spend your time in a rural environment. An added benefit is that all of these activities are low-cost and can help you stick to a strict budget.

Isolation and loneliness

If you're moving to a rural area far from your friends and family, isolation and loneliness may be a problem you have to deal with. In a small town where it feels like everyone knows each other, it's easy to feel like the odd one out.

According to the Tulane University School of Public Health, being isolated and lonely for too long can cause stress and depressive episodes. While it's OK to have an adjustment period when you first move, being isolated for long stretches of time may have adverse effects on your physical and mental health.

Urban and rural lifestyles have advantages and disadvantages. From the cost of living to the availability of amenities and entertainment, each lifestyle has a lot to offer for residents. It is up to you to decide what kind of life and what kind of environment is best for you, for your family, and for your budget.

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The costs and differences between rural vs. urban living are important to understand when considering a move. Each one has pros and cons.

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How does the cost of living in urban areas compare to rural areas in terms of housing affordability?

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-The article highlights that housing costs have reached nearly 40% of the average household income, indicating a significant financial burden on families.

-It suggests that the high proportion of income set towards housing costs poses challenges for households, potentially limiting their ability to meet other essential financial needs.

-The statistic underscores the broader economic impact of rising housing costs, signaling potential strains on households' financial well-being and raising concerns about housing affordability.

-The article implies that the important distribution of income to housing may necessitate careful budgeting, potentially affecting spending in other areas such as education, healthcare, or savings.

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The Motley Fool article "Housing Costs Now Make Up Almost 40% of the Average Household Income" discusses a significant facet of the housing availability issue in general. The article provides an indirect understanding of the difficulties households might face in finding affordable housing by focusing the percentage of income given to housing. The figure of over 40% highlights the financial strain that housing expenses place on the typical household and may indicate an impact on the supply of houses within sustainable economical limits. The author probably wants to highlight the affordability issue by highlighting how having a large amount of income go toward housing might make it harder to pay for other necessities.

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The given source, "Housing Costs Now Make Up Almost 40% of the Average Household Income," is an article from a respectable financial education website that can be found on The Motley Fool's platform. The Motley Fool is well known for providing analysis on a range of financial subjects, such as real estate and mortgages. Since it was published on a reputable website, The Motley Fool's reputation adds credibility to the piece. But the accuracy of the material relies heavily on the author's experience, therefore it's critical to evaluate their background in mortgages and housing expenses. Given the fluid nature of housing market movements, the statistics' publication date is essential to assessing their applicability. Since The Motley Fool strives to offer fair financial information, the article's objectivity is an important factor to take into account. Verifying the correctness of the statements through cross-referencing with other reliable sources is advised as it raises the information's overall trustworthiness. The accessibility and appeal of the content are enhanced by the tone and target audience, which is typically an engaged audience looking for financial insights.

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For many Americans, buying a home is a major financial goal. However, with the rising cost of housing, it's becoming increasingly difficult for families to make this dream a reality. According to recent statistics, housing costs now make up almost 40% of the average household income. This is a sharp increase from previous years, and it means that many people are struggling to afford even a modest home.

Why are housing costs so high?

There are several factors that have contributed to the rising cost of housing. One of the main reasons is low housing inventory. Over the past few years, there has been a shortage of homes for sale, which has driven up prices.

Additionally, low interest rates during the pandemic made it easier for people to afford higher home prices. However, this increased demand has also led to those higher prices. Plus, many people were forced to work from home, leading to an increased demand for homes.

To combat high inflation, the Fed has drastically increased interest rates. The monthly mortgage payment for a $500,000 home is over $1,000 more now than it was before the Fed began raising interest rates in March of last year.

Homeownership affordability near all-time lows

The Home Ownership Affordability Monitor (HOAM) index calculates the affordability of homes. It measures the percentage of median household income required to purchase a median-priced home in that area.

If the index number is less than 100, it indicates that the median household income is insufficient to cover the annual costs of owning a median-priced home and housing cost exceeds 30% of household income. If the index is 100 or greater, it signifies that the median household income is sufficient for a median-priced home, and the housing cost is below 30% of income.

The HOAM was above the affordability threshold from February 2019 to May 2021. Since then, it has dropped drastically to 68.6, the lowest since the Federal Reserve began monitoring homeownership affordability in January 2006.

The impact of the pandemic on the housing market has been significant. In July 2020, during the height of the pandemic, the cost of a median priced home accounted for 27.5% of a household's income. However, by October 2022, the median home price had skyrocketed to an alarming 43.7% of the median household income, almost half of what people were earning.

Although there has been a slight improvement in the most recent data (from April 2023), with the total payment share of median income at 40.9%, it is still significantly above the recommended 30% for a household's income allocation.
This disparity between home prices and income levels highlights the challenges many individuals and families face in trying to afford a home in these unprecedented times.
How to afford a home in the current market

If you're looking to buy a home in the current market, there are a few things you can do to improve your chances of finding an affordable option. The first step towards achieving this is to determine how much home you can afford.

Analyze your income, expenses, and debt-to-income ratio to decide on a realistic budget. Researching various loan options and interest rates is also essential to finding a mortgage that aligns with your budget.

Additionally, it is important to save for a down payment and to minimize unnecessary expenses along the way. Owning a home may be a significant investment, but with proper planning and determination, it can be a feasible option for many. Consider applying for an FHA loan or another type of mortgage with lower upfront costs.

Finally, work with a knowledgeable real estate agent who can provide guidance and help you navigate the market with expertise. With careful planning and some savvy moves, owning a home can be within reach despite current market conditions.

How to save money on your mortgage

Another way to make homeownership more affordable is to save money on your mortgage. This can be done by comparing rates from different lenders and finding the one that offers the lowest interest rate.

Additionally, you may want to consider putting down a larger down payment or paying points. This can help you get a better interest rate and reduce the amount of interest you pay over the life of the loan.

Finally, it's important to shop around for your homeowners insurance as well. By comparing rates from different companies, you can save hundreds of dollars per year on your insurance premiums.

The rising cost of housing is a challenge for many Americans. However, by understanding the factors that are driving up prices and taking steps to prepare yourself for the market, you can still find an affordable home. Whether you're looking for a fixer-upper or are focused on saving money on your mortgage, there are solutions out there that can help you achieve your goal of homeownership. With the right mindset and a little bit of preparation, you can find a home that fits your budget and your lifestyle.

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Housing Costs Now Make Up Almost 40% of the Average Household Income

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Home affordability has hit all-time lows. Here are practical steps you can take to reduce housing costs.

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What is the average percentage of income that households in a specific area spend on housing costs?

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A rising share of Americans say the availability of affordable housing is a major problem in the local community. In October 2021, about half Americans (49%) said this was a major problem where they live, up 10 percentage points from early 2018. In the same 2021 survey, 70% of Americans said young adults today have a harder time buying a home than their parents’ generation did.