Rising Home Prices Increase Cost Burden for Local Homeowners

By Dr. Kelley Cullen

Let’s start with the bad news: The steep increase in median home resale prices (up over $100,000 in the last three years) has put upward pressure on the share of Walla Walla homeowners who pay more than 30% of their income on shelter costs. Currently, about one of every five homeowners is what the US Census Bureau considers housing cost burdened and one in twelve is severely cost burdened paying more than 50% of income on shelter. 

The not-so-bad news is that Walla Walla’s MSA which includes both Walla Walla & Columbia counties current rate of 21% is below both the national average (22%) and the state (24%). Turning to nearby metro areas, the local MSA is just slightly higher than Spokane (19%) and just below the Tri-Cities (22%). While Spokane has a greater percentage of homeowners experiencing severe cost burdens (9%), Tri-Cities has a smaller percentage of only 6.4%.

For greater context, Walla Walla Trends (WWT) 5.1.6 Total & Share of Homeowners Paying 30% or More on Shelter Costs presents data from the US Census American Community Survey (ACS). Shelter costs include not only the sum of payments for mortgages, deeds of trust, contracts to purchase, or similar debts on the property (including payments for the first mortgage, second mortgages, home equity loans, and other junior mortgages). They also cover real estate taxes; fire, hazard, and flood insurance on the property; utilities (electricity, gas, and water and sewer); and fuels (oil, coal, kerosene, wood).

While a mortgage typically comprises the largest portion of shelter costs, for some lower income homeowners, the associated housing costs make up over 30% of their income. The Census Bureau also collects data on whether homeowners have a mortgage or not. Interestingly, one-third of homeowners in the Walla Walla metro area who are cost burdened do not have a mortgage. This is a greater percentage than both the state (20%) and national averages (25%).

From 2013 to 2019, median home resale prices (WWT 5.1.1) increased $40,000, but median household income rose by nearly $20,000 over the same period. On the other hand, from 2019-23, housing prices jumped over $100,000 while estimated  median household income (WWT 1.1.2)  increased by only $4,000. Thus, while most of the 2010s saw declining shares of homeowners paying more than 30% of their income on shelter costs, from 21% in 2013 to 12.5% in 2019, these gains have been nearly completely erased in the last three years.

So, why does this matter?

Affordable housing is important to communities to attract and retain workers across a wide variety of income levels. This diversity of workers promotes economic growth. Having a variety of affordable options, including owner-occupied housing, helps reduce childhood poverty and increases economic mobility.

When homeowners are housing cost burdened, less of their income (below 70%) goes to other requisite goods and services such as food or health care. As more homeowners see shelter costs rising above the 30% threshold, the demand for social services might increase.

Additionally, a recent National Institute of Health (NIH) journal article, Building the case for housing policy: Understanding public beliefs about housing affordability as a key social determinant of health made the connection between housing affordability,  numerous physical and psychological health consequences and high health care spending. The authors also found that behavioral health issues, such as alcoholism, are associated with living in homes at-risk of foreclosure, or in neighborhoods experiencing high rates of foreclosure. They concluded that a lack of stable housing due to cost creates barriers to accessing health care,  particularly detrimental to vulnerable populations and individuals living with chronic conditions.

The good news is that the Walla Walla MSA has previously experienced declining shares of cost burdened (and severely cost burdened) homeowners, as recently as 2013-19. If median home resale prices stabilize and median household incomes increase at a greater rate, then it is possible this important indicator will once again tick downward. In the meantime, it is important for policymakers to continue to monitor  Census data compiled on the Trends and to benchmark the findings to the state and other nearby communities to avoid the potential economic and social impacts of rising shelter costs.