November 17, 2019

Fewer homeowners carry housing cost burdens than before the recession


2019 NETAR President

may come as a surprise to some but according to the most current Census housing reports, homeownership cost burdens in the seven-county Tri-Cities region’s two Metropolitan Statistical Area (MSA) have declined from what they were before the Great Recession.

It is surprising because average home sales prices in the 11-county Tri-Cities region monitored by the Northeast Tennessee Association of Realtors’® Trends Report have increased 13 percent, and home prices have increased faster than wages in most counties.

Just the term “homeownership cost burden” is confusing. It’s distinctly wonky and on the surface something that sparks excitement in data geeks.  However, the opposite is true. Look at it this way. The more a person or family spends on housing, the less they have to spend on consumer goods and services.

A cost-burdened household is one that spends 35 percent or more of its monthly income on housing related expenses. For homeowners these expenses include mortgage payments, utility bills, property insurance, tax payments and any required condo or mobile home fees.

The Census Bureau’s American Community Survey (ACS) found that 20.9 percent of U.S. properties with a mortgage were cost burdened in 2018. In 2008, the number was 28.8 percent.

In the Tri-Cities two MSAs the share of cost-burdened homeowners was not down as much, but it was better than 10 years ago.

The Johnson City MSA had 25.3 percent of its homeowners' cost burdened in 2008 and 16.4 percent in 2018.

The Kingsport-Bristol MSA had 21.3 percent of its homeowners cost burdened in 2008 and 20 percent in 2018.

The picture was not quite as rosy for renters.

Nationwide an estimated 40.6 percent of renter households spent 35 percent or more of their monthly household income on rent and utility bills. That’s a dip of only 0.2 percent from 2008.

Tri-Cities renters enjoyed a bigger decrease.

In the Johnson City MSA 21.3 percent of renters were cost burdened in 2008, and that share dropped to 20 percent in 2018.

Renters in the Kingsport-Bristol MSA saw an even bigger drop – from 36.6 percent in 2008 to 33.4 percent last year.

Before anyone begins thinking that renters got the best deal, compare the percent of costs burdened homeowners to cost-burdened renters.

In 2018 Johnson City renters had a 33.4 percent cost-burdened share while the percentage of cost-burdened homeowners was 16.4 percent.

In Kingsport-Bristol cost-burdened renters accounted for 34.9 percent of all renters while the share of cost-burdened homeowners was 20 percent.

The bottom line is even with the higher prices in today’s market, local homeowners are paying a smaller share of their household income than renters. This truth is evident even in cases for owners who fall into the classification of cost burdened.

Homeownership builds wealth, either yours or your landlords. At some point mortgages can be paid off, but renters contribute monthly the landlord’s equity.

NETAR is the voice for real estate in Northeast Tennessee. It’s the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,300 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics can be found on the NETAR websites at .