High prices and costly mortgages force people to modify their living styles
Patricia Roberts, 32, a Federal Reserve Board researcher in Washington, decided that homeownership even before marriage was the best way to beat inflation. As a single person, her $24,000-per-year salary put her in a relatively high tax bracket, and she lacked the tax benefits of owning a house. The trouble was that she could not meet the steep mortgage payments required for homes in the expensive Virginia suburbs. Her friend Suzanne Reed, 30, who works for the House Republican Research Committee, was in a similar bind. "It finally dawned on us," says Roberts, "that we just couldn't afford the kind of place we wanted alone."
The two women then decided to become joint owners of a $111,000 town house in an Arlington, Va., development that designs homes for unrelated buyers who double up to beat the high costs of homeownership. Similar developments are cropping up in Phoenix, Denver, Houston and Montgomery County, Md. The sharing is usually done by two young singles, but friendly couples and unrelated senior citizens beset by loneliness, as well as inflation, are also doubling up. The obvious cause of the trend is the decade-long escalation of housing costs and mortgage interest rates. At present, the average-priced new home sold in the U.S. costs $67,100 and has a 17.5% mortgage.
Realtors have labeled those willing to share ownership and living arrangements as the "mingles market." Typically, mingles houses feature two or more identically sized master bedrooms connected to private baths, plus a shared kitchen and combination living and dining room. Houses and condominiums built for mingles usually are no bigger than four or five rooms. To preserve a semblance of privacy, the two master bedrooms are usually put at opposite ends of the house. "We believe people will settle for less if a home fits their life-style," says mingles developer Rick Sullivan, 36, who plans with partner Herman Porten, 52, to build 2,000 mingles town houses of 800 to 1,300 sq. ft. in the Washington suburbs. Price: $50,000 to $80,000 apiece.
Mingles housing is just one of the ways Americans are improvising to cope with the collapse of the traditional housing market. A maturing baby boom generation was once expected to fuel a housing boom throughout the 1980s, generating demand for 2 million new units annually. But consumers now are simply unable to buy homes. Fully 85% of U.S. families cannot afford the $904 monthly interest payment required for a typical mortgage of $60,000, at 18% interest, according to a study by the National Association of Home Builders.
As a result, new housing starts have fallen off a cliff. The Commerce Department last week reported that construction on new homes in October dropped to an adjusted annual rate of 857,000, the lowest level in 15 years. Starts of single-family homes meanwhile hit the lowest rate since the end of World War II, an adjusted annual level of 487,000.