Why the 30% Rule Doesn’t Apply in San Diego Anymore

Why the 30% Rule Doesn’t Work Anymore—And What to Do Instead

For decades, buyers were told one simple thing:

“Don’t spend more than 30% of your income on housing.”

It was the gold standard. The easy budget rule everyone—from financial advisors to mortgage lenders—used to measure affordability.

But let’s be real: in 2025, that number feels like a fantasy.

According to a recent Affordability Report from Realtor.com®, the typical U.S. household would need to spend 44.6% of their income to buy a median-priced home. In cities like Los Angeles, it’s over 100%. And here in San Diego County, we’re not far behind.

So if you’ve been running the numbers and wondering why it’s not adding up—you’re not crazy. The math has changed. The old rulebook doesn’t work anymore.

But that doesn’t mean you’re stuck. It just means it’s time to budget differently—and more realistically.

What the 30% Rule Got Right… and What It Totally Missed

The 30% rule didn’t come from a financial guru—it actually started with a housing policy back in the '60s. It eventually became a catch-all formula meant to keep buyers from overextending themselves.

In theory, it worked:

• It kept spending in check

• It left room for savings and daily life

• It gave buyers a general guideline to follow

But here’s where it falls short today:

• It doesn’t adjust for where you live (a $3,000 mortgage means something very different in Carlsbad than in Kansas)

• It ignores things like child care, student loans, or variable income

• It assumes interest rates are low and home prices are steady (spoiler alert: they’re not)

So instead of trying to force your dream into a broken formula, let’s rethink how we budget for homeownership—especially in today’s market.

🏡 How to Budget for a Home in 2025 (Without Losing Your Mind)

1. Start With What Feels Comfortable

Forget percentages for a second. Ask yourself:

What’s the monthly number I can afford—while still living my life?

Look at your actual expenses:

• Rent or current mortgage

• Car payments, insurance, groceries

• Travel, childcare, student loans

• Savings goals and emergency fund

The number might not be 30%—and that’s okay. What matters is that it works for you.

2. Know the Full Monthly Picture

A $700,000 list price doesn’t mean a $700K loan. Here’s what actually makes up your monthly payment:

• Mortgage (principal + interest)

• Property taxes

• Homeowners insurance

• PMI (if you’re putting down less than 20%)

• HOA dues (if applicable)

• Maintenance + utilities

A good lender can break this down for you before you even start house hunting—and that’s key to shopping smart.

3. Use the 30% Rule as a Gut Check—Not a Deal Breaker

If your housing costs are a little over 30%, but your other debt is low and your income is steady? You’re probably fine.

But if you're creeping up toward 50% and juggling credit card payments, student loans, and inconsistent income, it might be time to slow down and reassess. I know that this isn't always possible with our prices here, but it's a good benchmark to try to hit. 

4. Get Creative—and Think Local

Affordability is about more than price. It’s about strategy.

Here’s how buyers are making it work right now:

• Widening their search area — Even a 15-minute difference can drop prices by 10–15%

• Looking at new builds — Some builders are offering serious incentives

• Negotiating rate buydowns or closing cost credits — Yes, sellers are back to being flexible

• Focusing on what works right now — You don’t have to buy your forever home today. You just need a smart next step.

💬 The Bottom Line

The 30% rule may be outdated, but the goal behind it still matters:

Find a home you can comfortably afford, without sacrificing the life you’re working so hard to build.

And yes, that’s still possible in 2025.

You just need a more personal plan—and someone who knows how to help you build it.

Thinking about making a move? Let’s look at the numbers together and create a smart game plan that works for you. Book some time with me here: https://book.bookwithshell.com/widget/bookings/intro-call-with-shell