What Is House Rich, Cash Poor?

Definition

House rich, cash poor is when a homeowner has untapped equity in their property but is unwilling or unable to withdraw it. At the same time, their lifestyle or personal debt grows at an unsustainable rate. 

Person checking home finances and looking worried
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Definition of House Rich, Cash Poor

House rich, cash poor is the term used when a homeowner has equity built up in their home but is burdened by expenses that eat up most or even all of their budget. While they may have untapped equity in their property, they are unable to access it while their lifestyle or personal debt grows at an unsustainable rate. 

House rich, cash poor is as much a feeling as it is a state of being. The median sale price of a home has risen 121% over the last 60 years, meaning that regardless of when—or why—you’ve purchased a home, it’s likely gone up in value. The positive value of your home vs. what you owe on it is called equity

How House Rich, Cash Poor Works

Let’s say that you and your significant other bought a house in California in 2005 for $300,000. The pair of you put down a 20% down payment, meaning that the total of your loan was $240,000. With an interest rate of 3.05% on a 30-year loan, your total monthly mortgage payment came out to $1,529 per month. 

While this was a comfortable rate for you in the beginning, you and your significant other have since split up. Rather than choosing to sell the house, you bought out your partner with your savings. This made the mortgage payment tough, but doable. 

However, in the intervening years, the house has appreciated drastically. It’s now worth upward of $600,000, which you have chosen to leave as equity within the property. That’s great—and paying off a house can make sense when it comes to retirement. 

Although your job is steady, it doesn’t provide much room for growth—and with the cost of living rising so drastically, your once-affordable lifestyle has evaporated. 

Note

Income has only risen 29% in the last 60 years, four times slower than the price of housing.

You don’t want to tap into the equity of your home, such as with a HELOC or by refinancing. Nor do you want to alter much about the way you live your life. Instead, you watch as your savings slowly drip out of your account and the credit card bills begin to pile up. 

Despite more than $300,000 in equity, life is hard. This is house rich, cash poor. 

What House Rich, Cash Poor Means for You

If you’re one of the 73% percent of homeowners who feels house rich, cash poor at least some of the time, you may want to reconsider your lifestyle. This can mean cutting down some discretionary spending, such as on entertainment and dining out. 

It may also be that stagnant wage growth and a rise in inflation have meant that your cash flow has tightened—not lax budgeting. However, there are times when accessing the equity in your home makes sense. 

The average cost to replace a roof on a home ranges between $12,000 and $15,000. Rather than putting the replacement cost on a credit card or opting for an unsecured loan, both of which can feature high interest rates, withdrawing some of the equity from the property can give you the lump sum you need at a much lower cost. 

Key Takeaways

  • Being house rich, cash poor occurs when you have equity in the home and your current income doesn’t support your lifestyle.
  • Studies show that 73% of people feel house rich, cash poor at least some of the time. 
  • It can make sense to withdraw equity from your home in some cases, especially when your other options will cost you more money. 

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. FreddieMae. “Home Prices Growing Faster Than Wages.”

  2. Hometap. “Is Homeowner Debt Getting Worse?” Page 5.

  3. Bureau of Labor Statistics. “Consumer Price Index-March 2022.”

  4. Hometap. “Is Homeowner Debt Getting Worse?” Page 8,

  5. Bill Ragan Roofing Company. “The Average Cost to Replace a Roof.”

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