What Does Being 'House Poor' Mean?

Explore More Shows from Ramsey Network:

Ramsey Solutions Privacy Policy

[maxpendley]

Salaries have not kept up with housing prices, generally speaking. My parents bought their first house for $105k, and my dad made somewhere around $50k as an electrician. 20 years later, a similar house in that same neighborhood goes for $400k. Would you be surprised that most electricians don't make $200k these days? Sorry Dave, but is hasn't always been this way.

Edit: Please note that I never said that the increase in wages and increase in home values were related. Have a great day!

[Najibway]

Average salary of Americans is like 40-60k a year. However, average house is 400k. I’m sure that gap wasn’t there decades ago.

[AllynHin]

Well, it hasn't always been exactly the same. Housing costs have gone up a LOT more than incomes during the same period. The equation keeps changing. Back when I bought my first house, the 'rule of thumb' was that you didn't buy a house that cost more than 1.5X your annual salary. If your annual income was $30k (which was good money back then), you could afford a $45k house (which was a decent house back then). Then the equation went up to two times...then it went up to 2.5X. The multiplier had to keep going up to keep pace with the increase in prices. I have no idea what it is now. We own the property we live on and I have no intention of moving. Salient point is that housing has gone up a lot more than incomes. I am *so* glad we're not trying to start out now.

[MyLifeThai]

My brother and his wife were house poor. Their mortgage was $2050/month. They couldn't afford to go out on Fridays to socialize with their friends. They eventually sold the house and are so much happier now that they can actually afford to enjoy life again. They were so unhappy being slaves to their mortgage.

[unsuckified]

As a police officer who has been in many homes over my career, we had an interesting view of "house poor." We've been in houses that were very large and expensive, yet many rooms needed more furniture. I've seen this so many times, and usually, it would be bedrooms without furnishings, but sometimes it could be dining and living rooms, even fully finished basements with not so much as a chair.

[DustBunny-xdrz]

Right now, my wife and I own a house and have a comfortable mortgage. The downside is we live in a neighborhood that is not going in a good direction. We’ve decided we’re willing to pay a little more so that we can feel comfortable in our neighborhood and have a safe place for our daughter. It’ll take some adjusting of the budget, but we’re willing to make the sacrifice. For reference, we’ll be at around 38% debt to income ratio with a higher mortgage.

[boobbyjz]

Dave claims that “it’s always been this way”, while people provide real world, objective examples of how it’s different, and he fails to provide real world objective examples of how it’s the same. He grows more disconnected from the average American, who is supposedly his audience, by the day.

[Sergio-ikix]

With Dave’s logic, the average person in California would have to have a mortgage of ~1200. You’re lucky to even find a studio at that price in todays market conditions. And I’m talking about the Central Valley (waaaay cheaper than Bay Area / LA).

[scoobieamg]

We just bought on 2/15/24. Our house cost $425K. We put down 20%. Our mortgage is $2900. We net $7200. Yes its a bigger percentage than we would have liked but we are in our mid thirties and we dont think the housing market is going to get any better anytime soon. It is what it is.

[nic_ccc]

The house "appreciating in value" is not really important unless you're selling.

[jimmymcgill]

It was not always the same. Still living in his own little world.
Things were a lots cheaper back then.
In sixty eight, median household income was about 7.7k
Median home price was 12k.
Home prices went up more then ten times or more. Rent is the same things.
Pay only increased like seven times.

[suen]

No, it hasn't always been like this. In 1958 my parents were new teachers, grossed 8k and bought a modest family house for 15K. Wages have not gone up in the same way as housing. You aren't looking at the data.

[TheWealthyIdiots]

Dave’s responses can be pretty tone deaf.

People in California aren’t saying math doesn’t exist here. They are saying that renting is also destroying us. So can we pick our poison or is it better to be destroyed by rent than by mortgage?

[jthizdn]

Yes you never want to do this. I did this with my 1st house…. Terrible mistakes. Home buyers should buy well below their budget. Most buyers don’t account for home repairs etc. 🤦🏽‍♀️

[Elementalism]

I was house poor in my first house purchased in 2005. It sucked horribly and it took 3 years to get a new job that allowed me to crawl out of being house poor. Also buying a house is no guarantee it will appreciate. Not only was I house poor but right as I could finally afford to live in the house the housing market imploded. It took another 12 years for the house to get back to where I bought it to sell it and barely break even.

[philthjackson]

Why does Dave push people to move out of their parent's houses? It makes the most financial sense to stay with your parents. I get the life lessons you get moving out early, but it is not worth the rent prices and home prices these days.

[mustangthings]

Taking the 12k house in 1962 story down the path a little further, the msrp of a 1962 corvette was right at 4k. Using round numbers, let’s say a new corvette is 60k. The median house price in the US is 440k as of 2022. I realize I’m taking some liberties with these numbers, but, roughly speaking, the house that used to be 3x the cost of a corvette is now 7x the cost of a corvette. The math pertaining to affordability is still valid, as Dave says, but I really don’t think he grasps how insanely expensive housing has gotten.

[greydaze]

When I bought my house 5years ago (pre Ramsey knowledge), my mortgage payment was close to 40% of my income. My mom nearly had a conniption! But I was otherwise debt-free, still able to save 15% into retirement, no kids to pay for, and still able to save a few hundred dollars per month above my emergency fund and retirement. It was not easy but it was doable! Knowing what I know now, I wouldn’t make the same choice, but I don’t regret it. My income has now nearly doubled and I’ve refinanced, so it’s a much more reasonable payment now.

[flipmex]

Man when is Dave going to get outside of his bubble and realize the ratios of income to home price from today and 1962 aren’t nearly the same? It’s like he’s avoiding talking about that because in his mind, only the Midwest and southeast exist. It’s getting ridiculous now. Dave’s United States is only 25% of what it actually is. He has to try and factor reality into his formulas, but won’t because that’s not what made him rich in a time that isn’t anymore.

[ryankees]

I get the 25% of the income, but what about how salaries haven’t gone up as much as real-estate