Is 30% Rule Impossible in 2025? 47 of the 50 Largest U.S. Metros Now Require More
Photo by Sieuwert Otterloo
According to Realtor.com, a new analysis reveals a stark reality for today's homebuyers: the long-held "30% rule," which suggests spending no more than 30% of pre-tax income on housing, is now unattainable for median earners in 47 of the 50 largest U.S. metros. The report, which assumes a 20% down payment and May 2025's average mortgage rates, highlights the significant financial strain caused by stubbornly high home prices and interest rates. Nationally, affording a typical $440,000 home now requires a staggering 44.6% of the median household income, pushing the dream of homeownership further out of reach.
The affordability crisis is most acute in California, with Los Angeles, San Diego, and San Jose ranking as the least affordable markets. In Los Angeles, the typical annual housing cost actually exceeds the median household income by 4.5%, making ownership virtually impossible for the average family without an enormous down payment. On the other end of the spectrum, the only three affordable large metros are all in the Midwest: Pittsburgh, PA (27.4% of income); Detroit, MI (29.8%); and St. Louis, MO (30.0%). While the Midwest remains the most affordable region, widespread demand has started to chip away at its cost advantage.
The report concludes that without significant changes, the path to homeownership will remain challenging. While a sudden, dramatic rise in wages is unlikely, the most impactful levers are lower mortgage rates and lower home prices. Since rates are not expected to fall significantly in the near term, the key solution is to increase the housing supply. Encouraging new-home construction, especially in affordable price ranges, is presented as the most critical step to relieve price pressure and restore a measure of affordability for prospective buyers across the country.
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Fintech Founder at My Home Pathway. VC Backed Startup. Financial Inclusion Leader and Speaker.
Risk and project management professional with experience in Federal Reserve banking regulations, risk management policies as well as risk management advisory services. Critical skills include credit risk analysis, capital markets, strategic planning, current state assessments and target operating models. Ability to assess evolving regulatory guidelines and potential impact on financial services organizations operationally and strategically.
Mr. Johnson received his Bachelor of Science in Management and International Business from Penn State University where he was a Bunton Waller Scholar and Division 1 athlete and his MBA in Finance and Accounting from New York University.
