The 30% rule is now unrealistic. Here are 3 places you won't have to overextend your budget to afford a home right now.

Business Insider

a day ago

Buying a home this year? You'll be spending an even bigger chunk of your paycheck.
Data from Realtor.com shows that the median-priced home in May was $440,000. To afford a home at that price, the company found the typical American household would need to spend 44.6% of its income, far above the 30% that experts generally recommend for housing costs.
(Realtor.com based its income calculation on a scenario in which a buyer purchases a median-priced home ($440,000 as of May) in the US with a 20% down payment, has a 6.82% mortgage rate, based on Freddie Mac's May 2025 average, and has an annual tax and insurance rate of 1.72%.)
That 30% rule, which the Department of Housing and Urban Development suggested starting back in the 1980s, exists for a reason: It ensures households have enough room in their budgets for essential living expenses like groceries, utilities, childcare, and life's inevitable surprises, such as medical bills or car repairs.
But with today's high housing costs and sluggish income growth, that benchmark is no longer a realistic expectation for many households.
"Home prices have leveled off, but remain near historic peaks in much of the country," Hannah Jones, a senior economic research analyst with Realtor.com, told Business Insider. "Mortgage rates have hovered between 6.5% and 7% since last fall. Altogether, this means that for many households, buying a home today would be a stretch financially."
Especially since "home prices have accelerated faster than wages over the last 5-plus years," Jones added.
Many Americans aren't convinced that buying a home is smart
In 2023, the most recent year with available US Census data, median household income rose to $80,610 — the first annual increase since 2019, before the COVID-19 pandemic. According to Census data, the national median home price surged by 33% since the first quarter of 2019.
While home prices have begun to fall in some US cities, many Americans still aren't convinced that buying a home is a smart decision.
In June, Fannie Mae — which backs the majority of mortgages originated in the US — released its monthly housing survey, which polls 1,000 Americans, older than 18, each month on their views about renting, home buying, household finances, and the broader economy. May results showed that 74% said it was a bad time to buy.
You may especially feel that way if you live in coastal cities like Los Angeles, New York, and Boston. These cities already have the reputation of being expensive, but if you're making the median salary or lower, buying a home there will deeply cut into your take-home pay, according to Realtor.com. Data from the company shows that metro areas for those cities require a 104.5%, 66.9%, and 64.3% share of your income, respectively.
As for cities where you can budget more effectively, they're all closer to the middle of the map.
"The Midwest is the most affordable region in the country, and is the only region with large metros where the typical household can afford to buy the typical home," Jones said.
Only three of the top 50 metros made the cut:
In May, the St. Louis metropolitan area's median list price was $299,900, which required only a 30% share of income to afford;
Detroit's metro required a share of 29.8%;