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American Homeowners: House Rich, Cash Poor Like Never Before

6 min read
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picture of author, Hometap TeamBy Hometap Team on April 3, 2019

It’s not a secret: home prices in the United States are rising rapidly, while employee wages are remaining stagnant. The result? Americans today spend a higher percentage of their income on housing than ever before.

Hometap wanted to know how this crunch between wages and home prices impacts today’s homeowners, so we went out and asked more than 600 people who’ve owned their home for at least five years about their views on all things homeownership. We looked at everything from whether or not it still comprises the American dream, to the realities of financial strain, and even their confidence level 10 years after the 2008 housing crisis.

The results confirm some things we know, like millennials are facing increased financial pressure due to student loans, but others that surprised us, such as Boomer’s higher resilience regarding the 2008 housing crisis. Read on to learn more, and see how today’s homeowners are both struggling and thriving in a time when ‘house rich,’ and ‘cash poor’ has never been more true.

The American Dream is Not Easy to Achieve

In a 2018 study conducted by Hometap of over 600 homeowners in the United States, 93% of respondents said homeownership is a personal financial goal of theirs, while 88% equate homeownership with a higher level of personal success.

Combined with the reality that housing in America is becoming increasingly scarce and increasingly expensive, these findings demonstrate the American dream may be alive and well, but it is ever-more-challenging to achieve.

Survey respondents state that while their salary has gone up only 5% in the past 5 years, the value of their home has gone up 27%. While that’s good news from an equity perspective, it’s challenging for those just entering the market looking to purchase their starter-home (if they can even find one).

This sentiment is consistent with a study by S&P CoreLogic Case Shiller Home Price Indices, which indicates home prices have increased 48% since 2012, while wages have only increased by 14%, on average.

When it comes to the homeowners surveyed by Hometap, 65% say their housing costs are rising faster than their wages, making it hard to achieve other financial goals, including increasing savings and disposable income, paying off debt, helping children pay for college, and starting their own business.

Homeowners are House Rich, but Cash Poor like never before

Hometap survey respondents reported an average of $122,000 in home equity, but only 1 in 3 believe they can easily access that equity should they need to.

97% of respondents have other financial goals in addition to homeownership, but high monthly housing payments combined with an inability to access equity severely challenges these goals.

Debt Stress

It comes as no surprise that homeowners are unhappy with current financing options given their views on debt. 63% cite debt as one of their biggest daily concerns, while 91% say they would prefer financing options that allow them to tap into their home equity without taking on additional debt.

In fact, the overall interest in “no debt” choices among homeowners is higher than any other available option, including refinancing and home equity loans.

70% of homeowners surveyed by Hometap are interested in new financing options that allow them to convert equity to cash without taking on more debt. Two out of three homeowners surveyed by Hometap are interested in new financing options that would help them more easily purchase a home without taking on debt.

House-rich, cash-poor in retirement? Learn how homeowners are using Hometap to live comfortably in retirement.

The Result: Homeowners don’t do anything but stay house rich and cash poor

That’s right – the majority of homeowners haven’t even considered available options to tap into their home’s equity. However, if they could access that capital without taking on additional debt, here is how they would spend it:

  • Pay off credit card debt: 40%
  • Reinvest it: 37%
  • Remodel: 34%
  • Fund my retirement: 31%
  • Purchase a second home: 27%
  • Pay off student loans: 22%
  • Pay for children’s college: 20%
  • Pay a life expense such as medical bill: 16%
  • Help family or friends with an expense: 11%

When it comes to accessing their equity, the majority have never even considered most of the available options such as taking out a HELOC, home equity loan, or second mortgage. In fact, over 50% of homeowners have actually considered selling their home before tapping into their equity.

With an average of $122K in equity, respondents reported spending more than 50% of their salaries on housing costs, making these homeowners the exact definition of house rich and cash poor.

Read our 2019 Homeowner Study on the Causes of Debt Stress >>

At Hometap, we believe you should be able to have your house and your life and that the secret to getting both is unlocking the equity you’ve already earned in your home. A home equity investment allows homeowners to tap into their equity without the added stress of monthly payments or interest, so that they can focus on the financial goals that matter to them.

You should know

We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

Hometap is made up of a collaborative team of underwriters, investment managers, financial analysts, and—most importantly—homeowners—in the home financing field that understand the challenges that come with owning a home.

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