By Mike Stuckey Senior news editor
msnbc.com
updated 10/15/2007 6:10:49 AM ET 2007-10-15T10:10:49

In September, Gut Check America readers voted the middle-class economic squeeze as the most-pressing issue facing America. This month, we profile three families who wrote in to share their stories.

It’s no mystery to Dale and Darby Brennan why they have not realized their vision of the middle-class dream, despite seeing their income double to $70,000 in the past four years.

Like most middle-class American families, the Brennans’ vision includes owning a home. They’d like to buy in the Seattle suburbs, where they both grew up and where they now work and live in a rented house with daughters Olivia, 3, and Alicia, 2. But Western Washington, the Seattle area in particular, is one of the most expensive housing markets in the nation.

While simple geography may exaggerate the Brennans’ problem, it’s an issue faced by a growing number of young Americans. Housing affordability data, which links median home prices to median incomes, indicate they could become the first generation of the middle class to experience a serious decline in the rate of home ownership.

“We are doing all the right things with our money and I feel like the dream of owning a home is still so out of reach for us,” says Darby. “I don’t want a handout. I just feel like our middle-class income should be enough and it’s not.”

That income — from Darby’s job in technical support with a large electronics manufacturer and Dale’s position as a manager in a local produce business — is 8 percent below the median family income of $75,600 in their area, but 18 percent above the national figure of $59,400.

But the cost of a home where they live is nearly double the national median of $224,000. The Brennans’ street is the boundary between King County, where the median home price is $440,000, and Snohomish County, where it is $370,000. Even with a fat down payment in either county, which they don’t have, the Brennans wouldn’t qualify for a conventional mortgage on a median-priced home.

They aren’t alone. While the nationwide home ownership rate has remained near its record high of 69 percent for much of this decade, that could be changing. Despite sending two parents into the workforce to boost family earnings to record levels, even in inflation-adjusted dollars, the opportunity to buy a home is slipping beyond the grasp of many middle-class Americans.

The National Association of Realtors tracks the situation in its monthly Housing Affordability Index. Nationwide, the realtors group says, the ability of the average American family to buy the average home has fallen dramatically since 2004, when its index stood at 124. That number means that a family earning the median income made enough to afford 124 percent of the payment on an 80-percent mortgage on a median-priced home.

Plummeting affordability figures
But with the average mortgage interest rate up a full point, or nearly 20 percent, and housing prices up 15 percent since then, the nationwide affordability number has fallen to 106. 

And that’s fat city compared with the Brennans’ neighborhood, where the affordability numbers, as calculated by Washington State University, are  between 70 and 80. That means the average family there could afford only three-fourths of the payment on the average house if they could come up with a 20 percent down payment, which would be nearly $100,000 in King County.

WSU keeps a special set of statistics on housing affordability for first-time buyers. Those numbers are especially dismal, indicating that the average first-time home-buying family or individual couldn’t afford even 40 percent of the mortgage on a starter home in King County. The comparable figure for Snohomish County is less than 50 percent. 

“We pay to play here in Seattle,” Darby says with a sigh. “It comes with the ZIP code.”

But inside the neat white stucco rancher that they rent for $1,050 a month, a real bargain in the area, Dale holds forth with optimism that would impress Norman Vincent Peale: “I think America is a great place to live and if you put your mind to it you can accomplish anything in this country.”

It’s a perspective that Dale came to after growing up poor and in a “chaotic” single-parent household, then spending time in the military.

“The whole concept of a squeeze on the middle class just baffles me,” he says. “I don’t see it all.”

The problem for a lot of the middle class is a consumer mindset, says Dale, a devoted listener of talk radio who says he quickly transformed from a liberal Democrat to a conservative Republican after becoming a father and going to work in a small business.

Robert Hood  /  msnbc.com
Dale Brennan loves his job as the manager of a Seattle-area produce stand.
“Things are to be earned, not for instant gratification,” he explains. “It’s not what you have; it’s getting there.”

It was instant gratification provided by subprime lenders, he says, that drove up home prices across the nation in a “false economy” that is now triggering mounting foreclosures  and falling prices in many markets, although not yet in Seattle. “I look at what’s going on right now as a good thing for people like us,” he says.

Even so, Dale figures it will take five years for him and his wife to save enough for a down payment on a house. To maximize savings, they bake their own bread, plan every meal on a spreadsheet, take no vacations and seldom dine out.

“You can buy two pounds of oatmeal for a dollar and that makes breakfast for a month,” Darby points out. “I’m proud of what’s on our grocery list.”

Just one credit card: for gas
The family’s only credit card is used for gasoline, and is paid off each month. Their debts include $17,000 in student loans from when Dale attended a year of technical school, $9,500 owed on their nearly new Toyota Corolla and an $8,000 IOU to Darby’s mom for a car that no longer runs.

They only recently bought a second working car, a $1,400 used SUV in a deal from an acquaintance that was too good to pass up. Their days off are staggered, helping to keep child care expenses as low as possible.

Their home is neat and clean, with plenty of toys for the girls, but it’s clear  they are not running up charge accounts at Circuit City and Levitz. In the living room, a couch with a worn blue slipcover is flanked by a well-used rocker and a newer recliner. The entertainment center sports a television and other electronic equipment that are modest by today’s standards.

The frugal lifestyle suits Dale. “I get more out of advancing in my job than buying things,” he says. “I get more fulfillment out of playing with my girls.”

It’s harder for Darby, who had a solid middle-class childhood. “I like going out and buying things,” she admits.

“I’m looking at five years, that’s my goal,” says Dale. He thinks a nest egg of $25,000 to $30,000 that they hope to have by then and an increase in their salaries will get them into a home of their own.  “We’re better off now than we were six months ago and better off six months ago than we were 18 months ago. Attitude is everything.”

But to Darby the goal sometimes seems as lofty as the summit of 14,411-foot Mount Rainier, which looms in the distance on clear days. They save a bit, then an unexpected expense pops up. They have no retirement savings and Dale says the girls will need to pay for college if they decide to go.

“I’m not as optimistic as Dale is about saving,” she says. “Yeah, we’re making more money, but we’re still not saving much at all.”

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