Where does all the money go? In S. Florida, it goes for housing
By Paul Owers South Florida Sun-Sentinel
September 12, 2007
Housing costs in Palm Beach and Broward counties ate up a larger portion of people's paychecks last year than they did in 2000, according to U.S. census data released today.
It's yet another sign of how South Floridians stretched their finances as housing prices skyrocketed. Analysts fear the proportion of income homeowners spend on their mortgages will increase as adjustable-rate loans convert to higher interest rates. The gap between salaries and affordable homes could hurt the region's desirability, despite the recent drop in home prices.
"This place has really become unaffordable," said David Levin, a Delray Beach-based housing consultant. "You can't sustain your lifestyle when you spend a disproportionate amount of money on housing."
Last year, 42 percent of homeowners with mortgages in Palm Beach County spent at least 35 percent of their gross incomes on housing costs. That's up from 24 percent of homeowners in 2000. In Broward County, 43 percent of homeowners spent that much of their gross incomes on housing costs, a jump from 26 percent of homeowners in 2000.
Credit counselors once advised consumers not to spend more than 28 percent of their incomes on housing and no more than 36 percent on all their debts.
"That theory has eroded as people are stretching and stretching and stretching," Levin said.
Grace Short and her husband, James, are wilting under the weight of $3,500 monthly mortgage payments on a Boca Raton house that they refinanced four years ago. The payments are scheduled to increase in November.
"We just can't do it," said Short, 57, a hairdresser. "Something has to be out there to help people."
South Florida renters also are being squeezed, with more than half pouring at least 30 percent of their incomes into rent last year. Only about four in 10 did so in 2000.
The census defines homeowner housing costs as mortgage principal, interest, taxes and insurance, plus utilities, home-equity loans and homeowner association fees.
Nationally, the median household income grew by about 60 percent from 1990 to 2006, roughly matching inflation, according to the census. At the same time, the nation's median home value — the point at which half were more and half were less — more than doubled, to $185,200.
In Palm Beach County, the median price of an existing single-family home in July was $372,200, more than seven times has high as the county's 2006 median household income of $51,677.
Broward's median price in July was $373,700, while the median household income was $50,499.
"Salaries have not kept up with the cost of living in South Florida," said Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc. in Fort Lauderdale. "People are moving to the center of the state or out of the state and buying the same homes for half the price."
South Florida traditionally was considered an affordable place to live before investors started pulling their money out of the stock market and sinking it into real estate seven years ago.
The intense demand for houses and condominiums increased prices dramatically. That kept many middle-class consumers from affording properties and prompted lenders to sell risky loans to people so they could get into homes.
As home values spiked, so did property taxes. What's more, busy hurricane seasons in 2004 and 2005 sparked major increases in homeowner insurance premiums.
"It's very difficult for families today," said Jim Flood, a vice president with JPMorgan Chase Bank in Boca Raton.
To cope, consumers will have to get used to going without or pay off other debts to free up more disposable income, analysts say. Flood advises prospective home buyers to think smaller.
"Maybe you don't need to carry the bigger house," he said. "People might not want to hear that, but it's true."
Staff Writer Robin Benedict contributed to this story.
Paul Owers can be reached at email@example.com or 561-243-6529.