Try These Simple Tests to Figure Out If Your Home Is Affordable—or If You're 'House Poor'

Core Insights - A significant portion of the population, 54%, believes that housing is unaffordable, with only 13% considering it mostly affordable [1] - Affordability encompasses not just the ability to make payments but also the capacity to manage other financial obligations without strain [2] Traditional Affordability Rules - Two common guidelines for assessing housing affordability are the 30% rule and the 28/36 rule [7][8] - The 30% rule suggests that housing costs should not exceed 30% of gross income, while the 28/36 rule states that no more than 28% of gross income should go to housing and 36% to total debt [8] Additional Tests for Housing Affordability - The Cash-Flow Test evaluates if there is enough remaining income after housing costs for other expenses [5] - The Shock Test assesses the ability to handle unexpected financial shocks, such as income drops or rising housing-related costs [9] - The Stress Test identifies persistent financial stress as an indicator of unaffordable housing, with questions regarding reliance on credit and anxiety about payments [10]