From the AP:
When it comes to homeownership, Hispanics in New Jersey, single parents in California and senior citizens in Rhode Island all have something in common: More than a third have an unaffordable mortgage.
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.
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:
About 40 percent of black borrowers in California, Nevada, Oregon and Massachusetts.
More than 30 percent of Asian borrowers in California and Florida.
Nearly half of Hispanic homeowners in Rhode Island and at least 40 percent in Alaska, California, Florida, Hawaii, Maryland, New Jersey and New York.
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.
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.
For decades, the government and most lenders considered homeowners who spent 30 percent or more of their income on housing to be financially strapped.
But that rule of thumb got thrown out the window during the housing boom. When prices were soaring, many Americans could only afford to buy a home by taking out ever-riskier home loans. Lenders were happy to cooperate, because if the homeowner defaulted, the property could still be sold for enough money to cover the loan.
House-rich and giddy, American attitudes about debt and the risks that go with it changed dramatically.
“The average American is in hock up to his eyeballs,” said David Wyss, chief economist at Standard & Poor’s in New York.