Where (and Why) Budgets Are Stretched the Farthest
November 7, 2018
In certain areas of the country, homeowners are living beyond their means. Researchers at online loan marketplace LendingTree recently dug through credit report data to compare average household income, factoring in credit inquiries, the use of revolving credit lines, debt unrelated to housing, and mortgage balances.
They found residents in San Antonio, Texas; Riverside, Calif.; and Las Vegas are struggling to meet their bills. Researchers looked at the impact of a high cost of living on various variables, such as high vehicle expenses in San Antonio, lower income levels in Riverside, and high unemployment in Las Vegas.
While researchers found plenty of places where homeowners were living above their means, they also were surprised to find that some of the most expensive housing markets tended to have more residents living within their budgets. For example, pricey cities like San Jose, Calif. (which incorporates Silicon Valley) and San Francisco top the list of cities where people are most likely to live within their means. Raleigh, N.C., was also in the top three, thanks to modest mortgage-to-income ratios. In these locales, higher education and greater salaries may be helping them to stick to their budgets better.
Regardless of the reasons, the researchers noted that spending more than you have can have far-reaching consequences: “The longer it takes to pay off a debt, for example, the more one pays in interest. That added cost can have a compounding effect, leaving less to invest in retirement savings, college funds, or a home. Additionally, hard credit pulls and high credit utilization will lower your credit score, as does missing monthly payments.”
The following chart shows metros ranked from where people are most often spending within their means to those cities where residents are most likely to be spending beyond their budgets:
Updated: January 16, 2019