Damian Eales Chief Executive Officer | realtors.com
In the United States, the cost of housing continues to challenge the widely accepted 30% rule, which suggests that no more than 30% of a household's income should be allocated to housing expenses. According to Hannah Jones, a senior economic research analyst at Realtor.com, "This is not only the case in affordable areas but also in the country’s highest-priced towns."
Realtor.com economists have examined five of the most expensive towns in America with populations ranging from 5,000 to 100,000 residents and at least 20 property listings over the past year. They calculated the minimum salary required to afford a median-priced home under current conditions—assuming a 20% down payment and a mortgage rate of 6.72%.
Atherton, California tops this list as the priciest place in America. Over the past year, homes there averaged $8.9 million. To afford such a home while adhering to the 30% rule, buyers would need an annual income of approximately $1.85 million. Jones notes that "the typical home would require more than triple the typical household income to afford." She adds that many buyers in these high-priced areas often avoid mortgages or make larger down payments.
Following Atherton are Montecito, Malibu, Hillsborough, and Los Altos Hills—all located in California—where recommended incomes range from about $1.2 million to over $1.3 million annually for prospective homeowners.
Montecito is known for its exclusivity and celebrity residents like Prince Harry and Meghan Markle. Malibu offers coastal living favored by stars such as Beyoncé and JAY Z. Hillsborough attracts tech professionals due to its proximity to San Francisco and Silicon Valley, while Los Altos Hills is notable for its affluent community near Stanford University.
The findings highlight significant disparities between median household incomes and those recommended for purchasing homes in these cities.
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