Homeownership has been a cornerstone of the American Dream ever since the New Deal introduced the 30-year mortgage following the Great Depression. What’s new is how that widely held aspiration increasingly comes with strings. Property prices vary wildly by region and zip code, of course, but the toughest housing market in more than a generation means the average home went for $416,900 in the first quarter of this year. This price tag is more than double the amount in early 2009 following the subprime mortgage crisis.
Needless to say, the rise in most people’s household incomes hasn’t kept up with real estate’s vertiginous run-up. The steep price tag means that a larger share of a typical homeowner’s income now goes to the mortgage for their house, apartment or condo. Bankrate estimates that the average U.S. homebuyer now needs an annual household income of $116,986 to afford the typical property. This is nearly 50% more than just five years ago. Meanwhile, average household income rose just 1.3% from 2020 to 2023, according to the most recent data from the Federal Reserve’s St. Louis branch. Inflation has also cut into pocketbooks. The latest Bureau of Labor Statistics data shows you need $191 today to buy what $100 bought in January 2025.
However, despite the worsening pocketbook economics, homebuyers are willing to sacrifice their financial safety nets to achieve the American dream. More than two-thirds of U.S. consumers now live paycheck to paycheck, with their monthly income going out the door for basic bills and other expenses as soon as it comes in. Among those, 14% cite the financial strain of buying a home as a key reason for their financial condition. That means more than 24 million consumers live with crimped pocketbooks at least partly as a result of a tradeoff they deliberately made in order to own a home. As owning a new home often comes with a more restrictive financial lifestyle, many consumers choose pay-later credit methods that help make that possible. Nowhere is that more evident than with homeowners paying adjustable-rate mortgages (ARMs).
The share of consumers living paycheck to paycheck overall has decreased very slightly from its peak in April and May. But over the last two years, the youngest and highest-income segments have experienced the greatest strain with this financial tightrope. That signals that homebuyers and homeowners across the spectrum are choosing to put a larger share of their income toward owning a home.
Only about one-third of consumers living paycheck to paycheck do so solely out of financial necessity.
PYMNTS Intelligence research finds that among consumers living paycheck to paycheck, 31% do so by choice. That is, these consumers’ financial lifestyles are a result of their voluntary spending decisions. This group is the most likely to cite buying a residence as a key reason. Another 34% of paycheck-to-paycheck consumers attribute their financial lifestyle to necessity—to not making enough money to save or pay for anything beyond monthly bills for necessities and whatever discretionary items they choose. The remaining 35% of paycheck-to-paycheck consumers live that way due to a combination of circumstance and choice.
These are just some of the findings explored in “The Adjustable-Rate Reckoning: How Homeownership Is Pushing Millions Paycheck to Paycheck,” the latest installment of“ New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence exclusive series. This edition examines the financial tradeoffs consumers make and the expense management strategies they use to afford homeownership. It draws on insights from a survey of 2,135 consumers conducted from June 2, 2025, to June 23, 2025
24.4 Million Consumers Cite Homeownership as a Reason for Living Paycheck to Paycheck
Homeownership is a key reason for consumers choosing to live paycheck to paycheck. Nearly one in five such consumers cite buying a home that stretched their budget as a key reason they cannot live solely on their savings. These consumers aren’t buying a bigger or fancier house than they can safely afford. Instead, they’re holding mortgages that cut into their income. This share is greater than the 14% of all paycheck-to-paycheck individuals who said the same. It is far higher than the 7.8% of consumers who live this way by necessity, who cited this reason. The upshot is that homeownership is a major factor behind sending consumers into a paycheck-to-paycheck financial lifestyle. It ranks only behind taking time off work, buying a car and starting a business or freelancing as a primary source of income.
Similarly, consumers living paycheck to paycheck by choice are more likely than others in this lifestyle to be considering buying a home. Among these, 13% are actively looking to buy. This percentage is nearly three times the share of those living paycheck to paycheck by necessity. Meanwhile, by-necessity consumers are more likely to be considering purchasing a home down the line.
Homeowners Are More Likely than Other Paycheck-to-Paycheck Individuals to Use BNPL to Manage Expenses
With mortgages often accounting for a significant portion of these consumers’ incomes, they are turning to alternative budgeting tools to manage expenses. Many, for instance, are using BNPL to afford large purchases.
One in four consumers living paycheck to paycheck by choice report that they used BNPL for larger purchases in the past six months to manage rising living costs. This figure is more than twice the share of those living paycheck to paycheck by necessity. It seems that the widespread perception that shoppers use BNPL, which typically splits purchase payments into three or four monthly installments, out of desperation may be misleading. Many consumers whose budgets are stretched are using the credit method as a deliberate budgeting strategy.
Even homeowners are leveraging BNPL as a tool to manage rising living costs. One in five homeowners who pay a mortgage report having used BNPL in the past six months. This figure exceeds the share of renters who reported the same. Mortgage payers are the most likely of all paycheck-to-paycheck consumers to use the pay later method, intentionally utilizing BNPL as a flexible budgeting solution.
BNPL users are utilizing the credit tool in conjunction with other financial strategies to mitigate rising living costs. For instance, 41% of BNPL users have also reduced their nonessential spending in the past six months. Additionally, one in three have delayed or canceled a major purchase such as appliances, furniture or a car. It is evident that consumers are using BNPL as part of a broader, disciplined financial approach. They are combining flexible payment options with spending cuts to optimize their budgets.
Adjustable-Rate Mortgages Strain Paycheck-to-Paycheck Homeowners’ Budgets
Adjustable-rate mortgages can leave consumers in a tricky position financially. As such, borrowers with such mortgages are taking more actions to manage rising living costs than their counterparts with fixed-rate mortgages.
For instance, 42% of adjustable-rate mortgage holders living paycheck to paycheck report they have cut back on nonessential spending in the last six months. Just 37% of fixed-rate mortgage holders living paycheck to paycheck say the same. Similarly, 39% of those with adjustable rates have delayed or canceled a major purchase. In comparison, just 31% of those with fixed rates did so.
These disparities suggest that, as rates rise, these types of mortgages are cornering homeowners into more intensive financial coping strategies as they juggle cost pressures.
Adjustable-rate mortgage holders also rely more heavily on credit to make ends meet. They are more likely to use credit cards to cover basic expenses than those with fixed rates. Additionally, nearly eight in 10 paycheck-to-paycheck consumers with adjustable-rate mortgages have increased their use of credit in the last six months. Just over half of those with fixed rates have done the same. Only 2.9% of paycheck-to-paycheck adjustable-rate mortgage holders have decreased their use of credit in that timeframe, compared to 15% of fixed-rate mortgage holders. It appears that, as mortgage payments increase, homeowners are becoming more reliant on deferring payments for purchases.
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Methodology
This edition of “New Reality Check: The Paycheck-to-Paycheck Report” is based on a survey of 2,135 consumers conducted from June 2, 2025, to June 23, 2025. The report examines the financial tradeoffs consumers make and the expense management strategies they use to afford homeownership. Our sample was balanced to match the U.S. adult population by age, gender and region.
