What You Earn is Key to Where You Live

Here's how the economists look at the world: If you have a job, you'll pay your mortgage, credit card debt, student loans and auto loan payments each month. If you're unemployed, you'll pay until you run out of money, and then you won't.

Job stability and the wages you receive in each paycheck are central to the concept of a housing market that works and a functioning credit market.

If you don't think your job is stable, you're not going to spend money on anything except the barest of essentials: food, gas for your car, mortgage or rent, and utilities. If you're not earning enough to pay for food, rent and your credit card monthly payment, you'll be forced into some tough choices.

But even if you have a stable job that provides a good wage, your ability to afford housing in your neighborhood of choice may be somewhat limited due to skyrocketing home prices in the early 2000s.

The Center for Housing Policy, a research affiliate of the National Housing Conference, recently released a new study called "Paycheck to Paycheck: Wages and the Cost of Housing in America." The study, funded by Freddie Mac, looks at fundamental changes in the homeownership and rental markets from 2007 to 2008.

It turns out that even with home prices on the decline and the soaring number of foreclosures, there remains a gap between what workers earn and the cost of owning or renting a home, said Maya Brennan, a research associate for the Center for Housing Policy.

Some areas are more unaffordable than others, particularly those that enjoyed the fastest run-up in housing values.

For example, although Florida has been one of the hardest-hit states in terms of foreclosures, the rental market has become "substantially less affordable since 2007," Brennan said. "Florida was the only state in which all the metro areas became less affordable. That indicates to us that former homeowners in Florida aren't able to move into homes, and it's putting some pressure on the rental market there."

And thanks to the massive wave of foreclosures sweeping across the country, Brennan added, "places that have been ownership units aren't converting into rentals fast enough to make up for increased demand in rental housing."

It's Economics 101 all over again: Low supply translates into higher prices -- ones that people squeezed by a contracting economy and shrinking wages cannot easily afford.

"Paycheck to Paycheck" compares the income earned by people in 65 different occupations. It also looks at home prices in metro areas across the country.

The good news is that home affordability is better now than it has been in the past decade or longer. But the study found that while nearly all housing markets experienced a decrease in the income it takes to own a home, "it's not quite enough for a lot of people to get into homeownership yet," according to Brennan.