
Grades 9-12
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This lesson has students explore differences in regional housing costs, determine the percentage of gross income spent on housing, assess the impact of housing costs on a relocation decision and recognize wages and housing costs are prices.
This lesson has students explore differences in regional housing costs, determine the percentage of gross income spent on housing, assess the impact of housing costs on a relocation decision and recognize wages and housing costs are prices.
Computer Work
Consider the situation of Trish and Scott, a young couple with two small children living in Annapolis, Maryland. Both work. Scott is a family counselor and Trish is a production manager for a small computer company. Trish has just upgraded her education and is thinking about several new job offers, all of which require the family to relocate out of state. In Annapolis, Trish and Scott live in a three-bedroom, two-bath home on a .5 acre lot. The house is 15 years old and is 3,000 square feet in size. Their monthly house payment is $1,050, and their combined gross income is $75,000 per year (Trish earns $40,000 and Scott earns $35,000). Did you know that according to the Mortgage Bankers Association, 28% of your monthly income is considered the maximum amount you should spend for housing expenses (including loan payment, taxes, and insurance) and your total monthly debt payment cannot exceed 36%? What percentage of gross income is Trish and Scott’s house payment?
Use the calculator function on your PC computer by going to START, PROGRAMS, ACCESSORIES, and CALCULATOR or if you are using a Mac computer, go to the APPLE MENU and choose CALCULATOR. To make the calculation, you need two pieces of information, 1) the house payment amount, and 2) income earned each month. You have the house payment amount of $1,050, and you can calculate monthly income by dividing Trish and Scott’s yearly income by 12. (% of income spent on housing = $1,200/$6,666.67 * 100= 18%).
In order to make the move, Trish and Scott agree that they need a similar sized house in a friendly neighborhood, close to schools. Let's assume that they can sell the Maryland house for $185,000, payoff their mortgage, and have $30,000 left over for a down payment on a new house. A mortgage is a special type of home and property loan that gives you legal ownership while you pay down the debt. Failure to pay off the loan, also known as defaulting, results in ownership of the home or property to be returned to the bank and a nasty credit history for the people who default.
Your job today is to examine the housing costs associated with one of Trish’s job offers. Find yourself a partner (or group, depending on class size) and select one of the following cities..
Group Discussion
Each group will record the following information on the board or poster paper:
Based on the data, engage students in a group discussion related to Trish and Scott’s decision to relocate.
Review the decision to relocate and the importance of assigning benefits and costs to each factor. Remind the students that wages and housing costs are prices that influence people’s behavior. Ask each student to investigate his or her own housing situation. Students should find and record data similar to the information investigate in this lesson, such as size of home or apartment, monthly payment, number of bedrooms and bathrooms, type of mortgage, and interest rate.
Another activity related to this lesson involves the investigation of why housing costs differ around the country. Direct students to the Federal Reserve System web site https://www.federalreserve.gov/aboutthefed/federal-reserve-system.htm.
Students in each group would follow the link to their city’s regional federal reserve bank and click on the Regional Economic Update. Students would read the update to help determine economic conditions within their region and to learn those conditions relate to housing costs.
Additional funding for this site was provided by the Mortgage Bankers Association of America.
Grades 9-12
Grades 9-12
Grades 9-12
Content Partner
Grades 9-12