Jessica Rinaldi / Reuters

World War II veteran Howard McGowan, 88, is facing a 50 percent rent hike on the one-bedroom apartment in Malden, Mass., he and his wife have shared for 25 years.

One night last spring, David Hall returned home to his studio apartment outside Boston to learn that his monthly rent had spiked from $725 to $995.

It would be much cheaper for the maintenance manager to buy a nearby starter house than to stay put. But his mortgage broker told him that while his credit score was good, it was not high enough to meet banks' tough standards, he said.

"I know if I walk into a bank, they are just going to laugh at me," Hall says. "So I'm stuck."

He is not alone.

Five years after the housing bubble burst, the United States is in the midst of a housing affordability crisis. Home prices have fallen a third from their peaks, but many Americans cannot benefit because they cannot get a mortgage.

With credit tight, many consumers have no choice but to rent. Others who can afford to buy are also renting, because they view real estate as a lousy investment. With this increased demand, rents in some cities have jumped by double-digit percentage rates.

In the 12 months ended in May, rents rose 14 percent in San Francisco and 11 percent in San Jose, California, according to real estate data provider Zillow. Last year in Minneapolis, they spiked 11 percent even as home values sank 8 percent.

Apartment rent sticker shock gets worse 

People with lower incomes have long struggled to find affordable housing, but many in the middle class are now hurting, too.

Most personal finance experts recommend allocating no more of 30 percent of family income to housing, but nearly 40 percent of Americans are paying more than a third, according to the U.S. Census Bureau's American Community Survey.

In New York City, one-third of households are spending more than half their pay on rent.

"We have falling incomes, rising rents and nothing but substantial upward pressure on those rents," says Chris Herbert, director of Harvard University's Joint Center for Housing Studies. "And nothing in the cards suggests it will turn around anytime soon."

Today's housing market is a buyer's paradise.

It is now cheaper to buy a home than it is to rent in virtually every major city in the United States, according to John Burns Real Estate Consulting.

But for many in the renter class, buying even a modest home is impossible because financing is so hard to secure.

Lending for home purchases hit a 12-year low of $404 billion last year, down from $1.4 trillion in 2006, according to trade publication Inside Mortgage Finance. That means mortgage credit is tighter than it was even before the housing boom.

This year, lending is expected to drop even more, according to Inside Mortgage Finance.

A recent Morgan Stanley research report states that the average credit score is 762 for a consumer securing a mortgage backed by government-sponsored enterprises like Fannie Mae . But 65 percent of Americans have scores below 750.

In other words, a disproportionate number of mortgages are going to people with unusually good credit. A perfect score is 850, and anything below 660 is considered subprime.

"Basically, access to credit for borrowers with less than spotless credit is severely limited," the Morgan Stanley report states. "A good chunk" of U.S. households are "cut off from mortgage credit on this count alone."

For people who can get mortgages, rates are at their lowest levels in several generations. Add that to the cheap home prices, and houses are at their most affordable since at least 1970, when the National Association of Realtors began tracking this metric.

Normally, high affordability translates into higher sales. And the housing market is showing some signs of recovery -- the S&P/Case Shiller index of home prices had its third consecutive monthly gain in April. Last week, the NAR said pending home sales had matched a two-year high in May.

But any recovery has been tepid. The NAR said existing home sales had declined 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April. That is 34.2 percent above the July 2010 bottom of 3.39 million, but far short of the 5.5 million pace that the NAR considers healthy.

"Home sales have just barely picked up from their cyclical lows, and that's because there are still constraints to borrowing," said Moody's Analytics economist Celia Chen.

Part of the lender pullback has to do with the stringent regulations Washington put in place after the housing crash, says Michael Fratantoni, vice president of the Mortgage Bankers Association. These rules put more of the losses from bad mortgages onto lenders, instead of investors or government-sponsored enterprises.

Then there is the climate of unstable home prices and a shaky labor market: "There's a risk that even a borrower with moderately good credit may fall behind," Fratantoni says.

Consumers who cannot buy must rent, and that is where many Americans are feeling the pressure. A rent index from Zillow shows year-over-year gains for 70 percent of the U.S. metropolitan areas, while its home value index rose in only 7.3 percent.

Only a few years ago, landlords in cities like San Francisco and New York were tossing in a month or two of free rent, sometimes with parking, to lure tenants into signing leases.

Today, applicants are showing up at apartment viewings with copies of their unblemished credit reports and letters of recommendation from bosses and prominent friends, in the hopes of snatching up a place to rent.

Equity Residential, one of the biggest apartment owners in the United States, has more renters with high credit scores than ever, Vice President of Operations David Santee said on an April conference call with analysts.

Demand for apartments is also higher because many potential buyers in their 20s and 30s want to stay flexible - home ownership is not as attractive as it was to earlier generations.

Still, plenty of people would prefer entry into the ownership class.

Last spring Rosemary Wynder, a physician order specialist, found her rent shooting up. She decided to buy a house.

But a bank glitch in February had caused one late car loan payment, dinging her credit score. The Utica, New York, resident has been unable to straighten out the mistake, and five banks have rejected her for a mortgage.

"I've been crying," says Wynder. "I've been praying." 

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Courtesy of Zillow

  For those of you lamenting the heydays of the housing market, it may be time to leave the past behind.

It’s going to be a long time before we’re going to real-estate party like it’s 2005, according to real estate website Zillow’s chief economist Stan Humphries, who was on hand to take questions Wednesday during our live web chat on the housing market.

One question he took from a reader named Bob seemed to be on more than one person’s mind.

“Being in the middle class a.k.a. the new working poor, many of us felt better when our homes were worth more and some a lot more. Do you see the real estate market ever approaching the 2005/2006 price range?”

To that, Humphries offered a real estate reality check:

“In real terms, after considering inflation, it will be a considerable time (e.g., decades) before we reach those levels. Even in nominal terms, the prices you see on things everyday, we're likely looking at 10 to 20 years before some of the hardest hit markets return to peak levels.”

But it wasn’t all bad news.

Reader Charles asked: “Will the home values continue dropping?”

Humphries answered:

“Nationally we've had three months of increasing home values as of May. We've been expecting some modest declines nationally by year end but a lot of the larger markets are seeing stronger stabilization at this point than we'd previously expected.”

But, he added, it “really depends on the market as real estate is, as always, super local. Markets like Atlanta and Chicago are still seeing some declines in home values while markets like Phoenix and Miami are seeing real price spikes.”

You can see the entire Q&A with Humphries here:

Getty Images stock

Shared households accounted for 18.7 percent of all U.S. households in 2010. That's up from 17 percent of all households in 2007, the Census Bureau said.

More adults have been moving in with their families or seeking out roommates instead of creating a home of their own, and the most obvious culprit is the difficult economy.

The number of shared households increased by 11.4 percent, to 22 million, between 2007 and 2010, the U.S. Census Bureau said in a report released Wednesday.

Shared households accounted for 18.7 percent of all U.S. households in 2010. That’s up from 17 percent of all households in 2007, the Census Bureau said.

A shared household includes any adult who is not in school and has moved in with a family member or other adult that they aren’t romantically involved with.

Census Bureau researchers said they didn’t ask specifically why people were moving in with mom, dad or another roommate, but that the results suggest it was a way of coping with the weak economy.

That’s what prompted Brad McGarr, now 26, to get a roommate.

McGarr graduated from high school in 2004, landed a good job in the Phoenix area and was soon settled into a nice apartment of his own.

Then he lost his job in 2009, and was financially devastated by a long stint of unemployment. He lived with family for a while and then landed a job as a technical support specialist in the Denver area. Between the high cost of living and the toll his unemployment stint took, he felt like he had no choice but to get a roommate.

McGarr said sharing the rent helped him to get back on his feet, financially. A few months ago, he moved out of the roommate situation and in with his girlfriend. He said it feels like he’s restarting after the devastation of the recession.

“I think it’s starting to get to the point where I’m having more of a normal adult life,” he said.

Many people in their twenties and thirties are dealing with those kinds of setbacks.

Nearly half of the adults who moved into someone else’s house between 2007 and 2010 were 25 to 34 years old, the Census researchers found. About 10 million people in that age were living in someone else’s house in 2010, up from 8.5 million in 2007.

That’s an age when people are typically starting out in their adult life, finding a place of their own or getting married and starting a family. Instead, economists say many are hobbled by the tight job market and student loan debt. Sharing a house is a symptom of those problems.

“People are living at home because either they’re underemployed or they’re unemployed, and that’s because times are tough,” said Patrick Newport, U.S. economist with IHS Global Insight.

Many people of that age appear to be moving back in with mom and dad. A separate report from Pew Research found that more than two in 10 people in that age range were living in a multigenerational household. Pew referred to them as the “boomerang generation” because they’re coming back to the family home.

The fact that more people are sharing a home rather than striking out on their own is more bad news for the beleaguered housing market, which is still struggling from the effect of the massive housing bust. Newport expects it to have a ripple effect on the housing sector for quite some time.

Still, he said some of the money people aren’t spending on housing is likely being diverted to other parts of the economy, if they are drawing a paycheck at all.

“Instead of spending their money on rent or on a mortgage, they’ll buy computers or they’ll pay off their bills,” he said.

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Zillow

Click above to see a larger, more readable image.

Got that sinking feeling? Amid signs that the U.S. housing market is finally rising from a long slumber, real estate Web site Zillow reports that homeowners are still under water.

Nearly 16 million homeowners owed more on their mortgages than their home was worth in the first quarter, or nearly one-third of U.S. homeowners with mortgages. That’s a $1.2 trillion hole in the collective home equity of American households.

Despite the temptation to just walk away and mail back the keys, nine of 10 underwater borrowers are making their mortgage and home loan payments on time. Only 10 percent are more than 90 days delinquent.

Still, “negative equity” will continue to weigh on the housing market – and the broader economy – because it sidelines so many potential home buyers. It also puts millions of owners at greater risk of losing their home if the economic recovery stalls, according to Zillow’s chief economist, Stan Humphries.

“If economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures," he said.

For now, the recent bottoming out in home prices seems to be stabilizing the impact of negative equity; the number of underwater homeowners held steady from the fourth quarter of last year and fell slightly from a year ago.

Zillow map: Where homes are underwater

Real estate market conditions vary widely across the country, as does the depth of trouble homeowners find themselves in. Nearly 40 percent of homeowners with a mortgage owe between 1 and 20 percent more than their home is worth. But 15 percent – approximately 2.4 million – owe more than double their home’s market value.

Nevada homeowners have been hardest hit, where two-thirds of all homeowners with a mortgage are underwater. Arizona, with 52 percent, Georgia (46.8 percent), Florida (46.3 percent) and Michigan (41.7 percent) also have high percentages of homeowners with negative equity.

Today Money financial expert Sharon Epperson joined us for a live Web chat Wednesday to answer your questions.

Here’s one of her answers to questions from the live chat. (See below for the full Q&A and video of Sharon’s TV appearance this morning.)

Darla asked:

“Hi Sharon. Me and my husband would like to downsize on our home, but our credit isn't good so we probably aren't in a position to purchase another home. We'd like to get something less expensive but see no way out. Any advice you can provide? Thanks!”

Sharon replied:

“Why don't you rent? Take the headache of home ownership (lawn care, home repairs and unexpected emergencies) off the table and focus on rebuilding your credit and building your savings.”

Here’s the full chat archive and Sharon’s TV appearance:

If you have a question for our TODAY Money experts, submit it here.

To sign up for an e-mail reminder for our next chat, click here.

Here's a Catch-22 of the weak economy: You finally land that job you need desperately, only to find that you can't sell your home to move. CNBC reported Wednesday that many Americans are finding themselves stuck in their homes or forced to rent instead of sell.

Paul Sancya / AP

So many homes in Detroit are vacant that wrecking crews have been knocking them down.

Bringing a blighted, crime-ridden neighborhood back to life is never easy. This challenge has been tackled in Baltimore, Boston, Cleveland, Philadelphia and elsewhere, and now Detroit is in the spotlight for its dramatic urban-resurrection efforts.

Detroit Mayor David Bing this month unveiled a program aimed at enticing police officers to relocate from the suburbs to the city they serve. Dubbed Project 14, the program allows officers to buy vacant houses -- many of which were abandoned after foreclosures -- with down payments of only $1,000.

The historic homes being made available in Detroit’s Boston-Edison and East English Village neighborhoods are appraised at $40,000 to $80,000. Monthly mortgage payments, including principal, interest, taxes and insurance, are expected to fall in the $500 to $1,000 range.

A major benefit of the program, beyond the low payments, is that officers could be eligible for up to $150,000 in federal grant money to renovate the homes. Officials hope Project 14 will provide a double-whammy of recovery by fixing up houses that sorely need help and reducing crime because more police will be present within city limits.

Another Detroit program, Live Midtown, is offering incentives to encourage college graduates to move closer to the places where they work. Those incentives include $2,500 cash toward apartment costs for new renters and up to $25,000 in forgivable loans for new home buyers.

Do you think these kinds of incentives are a good idea? More importantly, do you think they will work?