Buyers in the Priciest Housing Markets Need 80% Down To Afford Monthly Costs

For many, buying a home in some of the most desirable cities such as New York City and Los Angeles is a dream—but it could come with staggering upfront costs, putting homeownership well outside the reach of the typical family.

Economists recommend that homebuyers follow the “30% rule,” which suggests that they spend no more than that amount of their pre-tax income on housing to leave enough money in the budget for other essential expenses and savings.  

Experts at Realtor.com® looked at where buyers earning a median income could comfortably afford to buy a home without breaking the bank. 

As part of the analysis contained in the new affordability benchmark report, our economists assumed the May 2025 average mortgage rate of 6.82%, a 20% down payment, and a standard tax and insurance estimate of 1.72% of the home’s price annually. 

Using this formula, the typical family would need to spend 44.6% of their income—well above the 30% affordability benchmark—to afford a median-priced $440,000 home, based on the May Housing Trends Report.

Coastal metros bust the ‘30% rule’

But five highly sought-after coastal cities earned the dubious distinction of being the least affordable in the U.S., shattering the 30% rule. To meet that benchmark in these in-demand markets, homebuyers would have to pony up between 80% and 95% in down payments if they hope to make ends meet after move-in day.

Of the five areas, the three priciest markets are all in California, led by Los Angeles, which is so eye-wateringly expensive that typical annual housing costs exceed the typical annual income—one of the reasons the majority of households in America’s second-largest city choose to rent rather than buy.

Despite the median household income in L.A. being $91,380 in May—more than $10,000 higher than the national median income of under $79,000—the fact that the typical home there was listed for $1.195 million last month means that most households do not have the purchasing power required to close on a home with a standard 20% down payment. 

Not only that, but considering the median list price, median income level, and estimated tax and insurance payments of $95,496, it would take a stunning 90% to 95% down payment for a family to buy a house.

Therefore, it should come as no surprise that less than half of Los Angeles’ households own their homes, compared with the national homeownership rate of more than 65%.

San Diego and San Jose, CA, are not far behind in unaffordability, gobbling up 77.1% and 72.4%, respectively, of the typical household’s income to buy a median-priced home.

“Though San Jose boasts the highest median income of the 50 largest U.S. metros, the typical household will still find trouble in the housing market, as San Jose also suffers the highest median listing price,” says Realtor.com Chief Economist Danielle Hale.

The typical household in San Jose earns $156,664 per year, but with the median list price in May being a sky-high $1,419,000, the annual mortgage payment, plus taxes and insurance, would amount to $113,436, leaving less than 30% for other essentials and savings. 

To meet the affordability recommendations and have enough money to cover nonhousing expenses, a San Jose household would have to set aside a down payment of roughly 80% of the home’s price.

The same is true for San Diego, where the typical home last month came with a price tag of $995,000, requiring a household to spend $79,513 of its $103,066 yearly income just to keep up with mortgage, insurance, and tax payments.

On the East Coast, the affordability outlook is equally bleak. In both New York City and Boston, a down payment of around 80% was needed for the typical household to stick to the 30% benchmark.

The Big Apple saw its median list price climb to $795,000 in May. With annual housing expenses estimated at $63,531, it means the typical family would have to spend nearly 67% of its median income of $94,960 just to cover housing—unless it plunked down an 80% down payment. 

In Boston, the situation is just marginally better, with a household having to spend over 64% of its median income of $109,295 to cover mortgage, tax, and insurance payments totalling $70,243 on a median-priced home of $879,000.  

“High-priced Northeast markets face high demand and low construction, which has resulted in a growing home supply gap,” says Hale. “To remedy this challenge, and provide hope for prospective buyers in the country’s most expensive markets, supply needs to increase to better match demand.”

Midwest leads in housing affordability

Even outside the nation’s highest-priced metros, affordability remains a major challenge for many aspiring homebuyers amid rising home prices and elevated mortgage rates.

Of the 50 largest U.S. metro markets, only three cities—all clustered in the Midwest—were found to be affordable for those earning a median income.

Pittsburgh, Detroit, and St. Louis stood out for having house prices low enough to allow households earning the typical income to buy them without breaking the 30% rule.

The typical single-family home in Pittsburgh cost $249,900 in May, which would require just 27.4% of the median income to finance, assuming a 20% down payment—making the Steel City the nation’s most budget-friendly metro for homebuyers. 

Detroit was not far behind, with the median home price of $270,000 requiring 29.8% of the typical income to go toward housing expenditures. St. Louis saw the price of the typical for-sale home reach $299,900 in May, laying claim to 30% of a household’s median income. 

Two more Midwestern metros—Cleveland and Indianapolis—came in at just above the 30% benchmark.

“Homes in Cleveland are lower-priced than in St. Louis, but a lower median household income means that buyers would need to spend 32% of their income to afford a home in the area, making it a bit less affordable,” explains Hale.

Indianapolis boasted a median income near the same level as in St. Louis, but with the typical home priced at $331,500, the typical household would need to set aside just north of 33% of its income to cover housing.