A new study from loan provider Hometap shows that one in five homeowners in the U.S. consider themselves “house rich” but “cash poor,” hindering their path to other financial goals.
Hometap’s data was gleaned through a survey of 675 homeowners conducted this past June. The survey found that 19.5% of respondents classified themselves as “house rich, cash poor” most or all of the time, while 73% of homeowners feel “house rich, cash poor” at least some of the time.
“We knew there were pockets of homeowners who felt house rich, cash poor — we see that every day in our work — but were surprised to find that one in five feel that way so often,” said Jeffrey Glass, CEO of Hometap. “Mortgage rates are at historic lows, which is encouraging more people to buy, but despite 45 million homeowners with excess equity, we’re seeing really conservative behavior — perhaps a lasting effect of the 2008 financial crisis.
“Unless wages start to rise relative to home values, we’ll see more homeowners falling into the house-rich, cash-poor category.”
The survey found that the main stressors for homeowners are uncertainty of future income, cited by 82% of respondents, and the anticipated costs of home maintenance and repairs, indicated by 81%.
Many of these homeowners are struggling to find answers and, as a result, are pessimistic about these issues improving in the near future. Fifty-seven percent of respondents indicated they can’t find solutions to alleviate being house rich and cash poor. Sixty-six percent perceive that housing costs are rising faster than income and 77% expect that the gap between the two is going to get larger. Seventy-three percent said they don’t want to take on more debt through traditional financing options such as home equity loans, while 12% said they wouldn’t be able to get a loan or sell their home.
The survey also found that millennials in particular are locked into these struggles. Sixty percent of millennial homeowners agree that their housing costs are making it difficult to achieve their financial goals, with 19% saying that at least half their monthly income goes toward their mortgage payment. Thirty-six percent of millennial homeowners also are paying off student loans.
Survey findings suggest that millennials are instead planning for the next generation when it comes to alleviating their housing-cost woes. Compared to members of Generation X or baby boomers, millennial homeowners are more likely to be stressed about saving for their child’s college costs or potential children (42%), or about one day helping their children buy a home (15%).
“This may be surprising to some, since Gen X homeowners would presumably have children getting ready for college and/or buying their first home,” Glass said. “But because many millennials are saddled with more student debt than previous generations, I believe they are highly motivated to help their children graduate college with little or no debt, to avoid many of the financial stresses that they’ve endured.”