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The 30-Percent Rule Is Outdated for Most U.S. Homebuyers - Here's Why

  //house-home.news-articles.net/content/2025/12/1 .. outdated-for-most-u-s-homebuyers-here-s-why.html
  Published in House and Home on Friday, December 12th 2025 at 18:57 GMT by news4sanantonio
      Locale: Texas, UNITED STATES

The 30‑Percent Rule Is Out of Date for Most U.S. Homebuyers – Here’s Why

The familiar guideline that a homeowner should keep their mortgage payment at no more than 30 % of gross monthly income has been a staple of housing advice for decades. Yet, a recent piece from News4San Antonio reveals that this rule, once a reasonable baseline in the 1970s and ’80s, is increasingly inadequate for the majority of Americans who want to purchase a home today. The article argues that soaring house prices, stagnant wage growth, rising interest rates, and regional disparities have all conspired to render the old rule obsolete in most major markets.

The 30‑Percent Rule and Its Roots

The 30‑percent threshold originated with the U.S. Department of Housing and Urban Development (HUD) in the 1970s as a conservative estimate of what most households could afford while still keeping other essential expenses in check. The rule was also popularized by financial advisers and mortgage lenders, who used it as a quick screening tool to gauge whether a prospective borrower was financially ready for homeownership. By limiting housing costs to roughly one‑third of total income, the rule aimed to preserve a buffer for groceries, healthcare, transportation, and savings.

However, the article notes that this rule was never meant to be a hard and fast rule for all circumstances. It was an average figure designed for the economic conditions of its era, when median home prices hovered around $70,000 and median household incomes were about $35,000.

Rising Prices and Stagnant Wages

Fast‑forward to today, and the numbers look very different. According to data cited in the piece, the median home price nationwide is around $400,000, while the median household income sits near $55,000. That alone pushes the median price to more than seven times the median income. In the most expensive metros—San Francisco, New York, Washington, DC, and Los Angeles—the ratio climbs to nine or more times income.

Even in a place like San Antonio, the city’s own median home price (about $280,000) compared to its median household income (roughly $48,000) yields a ratio of more than five to one. As the article explains, if a buyer follows the 30‑percent rule in a city where the median house price is five times the median income, the mortgage would consume so much of the household budget that they could barely cover the rest of their living expenses.

Wage growth has failed to keep pace. The article cites recent surveys indicating that over the past decade, median household earnings have increased by only 8 % in real terms—far below the rate of inflation in many urban markets. At the same time, mortgage interest rates, while currently below historic highs, have risen sharply from the near‑zero levels seen during the pandemic, further squeezing affordability.

The “28/36” Rule and Other Modern Guidelines

Mortgage lenders still use a similar logic to assess risk, but with a slightly different formula. The “28/36” rule is common: no more than 28 % of gross monthly income should go to housing costs (including mortgage, property taxes, insurance, and sometimes utilities), and no more than 36 % should go to all debt obligations. While this rule still hinges on a roughly 30‑percent ceiling, it does not account for the higher costs of living in certain metros.

The article stresses that in high‑cost areas, even the 28‑percent ceiling can be too low. A lender might deem a borrower “affordable” by the rule, but the borrower may still be forced to allocate a large portion of their paycheck to housing, leaving little room for savings or emergencies. The piece quotes a local mortgage broker who notes, “When you’re spending 40–45 % of your income on housing, you’re at risk of default if any unexpected expense crops up.”

Regional Disparities and Housing Types

The article highlights that the rule’s inadequacy is not uniform across the country. Rural and many mid‑size cities still see median home prices that are closer to 3–4 times median income, making the 30‑percent threshold somewhat more realistic. In contrast, the most affluent and tech‑driven cities, with their high demand and limited supply, have pushed median home prices to an unsustainable five‑to‑six‑fold multiple of median income.

It also touches on the impact of the type of home. Townhouses and condominiums, which can be more affordable than single‑family homes, still often have price-to-income ratios that exceed 30 %. In San Antonio, for example, the median price for a townhouse sits around $200,000, which is still roughly four times the median household income.

Expert Take‑aways

A few experts featured in the article provide context and potential alternatives:

• Housing Economist Dr. Maria Lopez: “The 30‑percent rule is a relic. Instead of focusing on a single percentage, buyers need to look at a composite of affordability, including maintenance costs, property taxes, and the local labor market.”

• Real‑Estate Analyst James Chen: “You’ll see more home‑buyers using a 40‑percent threshold in high‑cost areas, coupled with a stricter debt‑to‑income check. That’s a more realistic framework for today’s buyers.”

• Mortgage Servicing Director at a regional bank: “We’re encouraging borrowers to get a thorough budget analysis that goes beyond the mortgage. Housing is just one piece of the financial puzzle.”

What Buyers Can Do

Given the article’s findings, it offers several practical strategies for those aiming to purchase a home:

1. Recalculate Affordability – Use online calculators that factor in local property taxes, insurance, and utility costs to get a realistic monthly housing budget.

2. Explore Alternatives – Consider buying a smaller or more affordable unit, such as a townhouse or a condo in a lower‑cost neighborhood. Look into “first‑time buyer” programs or down‑payment assistance.

3. Consider Co‑ownership – In extremely expensive markets, joint ownership with family or friends can spread the financial burden.

4. Save More – A larger down payment can reduce the loan amount and help keep monthly payments below 30 % of income.

5. Stay Informed on Interest Rates – Locking in a fixed rate can protect against future rate hikes. Also, explore adjustable‑rate mortgage options if you plan to sell or refinance within a few years.

The Bottom Line

The News4San Antonio article underscores that the classic 30‑percent rule, once a useful guideline, no longer reflects the realities of most U.S. housing markets. Rising home prices, stagnant wages, and higher living costs mean that many buyers—especially in large metros—are spending a far larger share of their income on housing than the rule would suggest is safe.

The piece calls for a more nuanced approach to affordability: one that incorporates local market conditions, a broader view of household expenses, and realistic budgeting practices. For prospective homebuyers, the takeaway is clear: rely on a comprehensive financial plan rather than a single percentage rule. By doing so, they can avoid the pitfalls of overextending themselves and achieve sustainable homeownership in today’s complex market.