A study indicates that around half of U.S citizens allocate more than 30% of their earnings towards housing expenses.
In the United States, housing costs are a significant burden for many, with half of Americans spending 30% or more of their pre-tax income on housing expenses. Holden Lewis, a real estate expert at NerdWallet, offers effective strategies to help manage housing costs that exceed the recommended 28% of pre-tax income.
One of the strategies Lewis suggests is to consider buying smaller, more affordable homes. Builders are responding to affordability challenges by constructing smaller houses, with nearly half of new homes priced under $400,000 as of April 2025. Choosing smaller, less expensive homes helps keep mortgage payments below the recommended threshold.
Another strategy is to negotiate builder incentives. Builders often offer mortgage rate buydowns or discounted monthly house payments for the first few years to attract buyers when interest rates are high. Taking advantage of such incentives reduces upfront housing costs.
Improving overall financial profile is another key strategy. Before buying, focus on paying down existing debts and building your credit score to secure better mortgage rates, which lowers monthly payments.
Preventative home maintenance is also crucial. Regularly inspecting and maintaining your home helps avoid expensive repairs later. Homeowners are advised to review their homes periodically to catch and fix minor issues before they escalate, reducing unexpected costs associated with homeownership.
For renters, getting a roommate or house hacking (living with roommates to offset costs) can help reduce housing expenses. Similarly, homeowners can have a boarder (a tenant who lives in a spare room) to help offset housing costs.
A future decrease in mortgage rates may allow for refinancing and a lower monthly payment, but currently, mortgage rates are high, preventing refinancing for a lower payment. Lewis recommends looking for other areas to cut costs, such as transportation or entertainment, to offset increased housing costs.
Shopping around for the best housing deal is still important, and comparing homeowners' insurance rates before renewing a current policy is another way to reduce housing expenses.
However, Lewis acknowledges that expensive housing is a problem with limited solutions. Finding housing that is 28% of monthly earnings without a high income is challenging. Despite this, Lewis does not recommend "whitewashing" the housing cost issue by suggesting simple solutions like getting a roommate or being a house hacker.
In conclusion, these strategies aim to keep housing expenses more manageable relative to income, helping homeowners and renters avoid spending over 28% of their pre-tax income on housing. NerdWallet's guidance on housing affordability and cost management provides valuable insights for those seeking to reduce their housing costs.
Implementing personal-finance strategies is crucial for managing housing costs. For instance, considering buying smaller, more affordable homes can help keep mortgage payments within the recommended 28% of pre-tax income. Additionally, negotiating builder incentives or getting a roommate could further reduce housing expenses, thereby enabling individuals to maintain a healthier personal-finance balance.
