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Housing costs stress third of state households
Burgeoning mortgage problems could be behind new housing and income numbers that show increasing financial stress.
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More than one-third of Minnesota homeowners are financially stressed, according to a Census Bureau survey to be released today that is starting to pick up the subprime mortgage problems roiling individual family budgets and national stock and credit markets.
Last year, 33.9 percent of owner-occupied households across the state spent more than the 30 percent of income on housing, the common benchmark for affordability. That's nearly 380,000 Minnesota households, an 8 percent rise from 2005 and 70 percent jump from 2000. Housing costs include mortgage, taxes and utilities and insurance.
The 2006 increase is beginning to reflect mortgage demands hitting both first-time buyers stretching to afford a home and homeowners who refinanced for cash to spend or pay down credit cards or car loans, economists and housing experts said. Many of those were adjustable rate mortgages that began at interest rates as low as 4 percent but now are resetting at higher rates that can double monthly payments.
Al Ynigues embodies the statistics. Ynigues, who bought his first home in Apple Valley three years ago when he was 64, took on a mortgage that was a big stretch to begin with: $1,645 a month, about half his income at the time. Ynigues, who had spent most of his working years on the road as a musician, had decided to settle down and teach music out of a home studio.
But since he bought the house, his interest rate has climbed from 6.9 percent to 11.9 percent, bumping his monthly payment to an impossible $2,500 this November -- roughly 100 percent of his current income.
"I thought this would be my American dream, and it has turned into my American scream," Ynigues said.
Minnesota's nearly 34 percent of homeowners who are overextended puts it near the middle of the national pack -- No. 23 among states -- according to the Census Bureau. California was the highest, at nearly 52 percent; the national average was 36.9 percent.
Housing prices are rising faster than income, which is roughly keeping pace with inflation in Minnesota, according to Wells Fargo senior economist Scott Anderson and economic data.
One sign that strapped first-time buyers are pumping up the state housing-to-income ratios is in the Twin Cities exurbs. Historically, that's where affordable homes proliferated. But among the counties with the highest proportion of housing costs above 30 percent last year were Carver, Sherburne, Anoka, Wright and Washington.
Refinancings are also part of the problem.
"People gave up affordable mortgages to cash out the equity in their homes," said Dan Williams, program manager of financial counseling for Minnesota Lutheran Social Services in Duluth. "The consumer spending that resulted was even credited with helping the economy; it's just 'what you did.'"
The state's two big urban counties also had high rates of homeowners who crossed the 30 percent mark: In Hennepin County, it was 35.4 percent; in Ramsey County, 37.3 percent. Both were around 20 percent in 2000.
Renting has gotten more expensive in Minnesota, too, today's report shows. Last year, 44.6 percent of renters crossed that 30 percent mark, up from 35 percent in 2000.
Not all news was bad. Minnesota continues to lead the nation in homeownership, according to the Census Bureau. Last year, 76.3 percent of Minnesota homes were owner-occupied, compared with 67.3 percent nationally.
H.J. Cummins • 612-673-4671
H.J. Cummins • hcummins@startribune.com
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