Housing Costs Squeeze Middle-Class Homeowners Rising Costs and Interest Rates Create Challenges for New Homebuyers

The pressure on middle-class homeowners is growing as housing costs skyrocket, leaving more families financially precarious. According to an analysis by NBC News, nearly one in four middle-income homeowners spent more than 30% of their income on housing in 2022—double the rate from a decade ago.

This trend, often called “cost-burdened,” reflects the increasing difficulty many households face as they attempt to balance housing payments with other essential expenses like food and emergency savings. The benchmark, long used by the U.S. Census Bureau and the Department of Housing and Urban Development, sets 30% as the threshold at which housing costs become unaffordable.

As homeownership costs have surged, families like Haley and Ben Williams of Elkhart, Indiana, have had to make tough choices. The couple purchased their home for $265,000 in December 2023 with an interest rate of 8.125%, pushing their monthly payments to over $2,000—well above the couple’s initial budget. Despite the financial strain, Ben explained that buying the home was a “necessary sacrifice” to ensure a better environment for their growing family after struggling with a mold-infested rental property.

Their story is far from unique. In many U.S. counties, including Elkhart, average homebuyers are pushed into cost-burdened territory by rising prices and competitive markets, often losing out to cash buyers. Experts point to a confluence of factors driving this phenomenon: record-high home prices, increasing property taxes, and soaring insurance premiums, all compounded by rising interest rates.

In areas like Elkhart, where home prices have surged, the average household earning $67,000 would have to devote 22% of its income to housing costs for a median-priced home. This figure has nearly doubled in just three years, and nationwide, the middle class now accounts for a shrinking share of new homebuyers, dropping from 60% in 2010 to less than 50% in 2022.

Daniel McCue, a senior researcher at Harvard’s Joint Center for Housing Studies, warns that despite gains in median household incomes—up 50% over the past decade—housing costs have outpaced earnings, squeezing many middle-class families. Lower-income households, single-parent families, and minority communities are disproportionately affected by these cost burdens, exacerbating income and wealth inequalities across the country.

With rising homeownership costs, families are forced to economize elsewhere, making tough decisions on daily expenses. Haley Williams shared how her family has adapted, cutting back on food waste and limiting meat purchases as they grapple with rising costs. However, the long-term consequences of these compromises are troubling, as families may struggle to keep up with home maintenance, further stressing the nation’s already aging housing stock.

The growing pressure on homeowners underscores the need for solutions as the middle-class grapples with the changing realities of the housing market. Without relief, more Americans will find homeownership out of reach, even as the costs of maintaining their homes climb.

This story is adapted from a report by Jasmine Cui, a reporter for NBC News. Haley Messenger contributed.