How many people follow the mortgage to income rule of thumb?

By | March 18, 2017

There’s a famous rule of thumb which states that you should not spend more than 28% of your monthly income on a housing payment (typically including taxes and insurance). So how many people actually follow this rule of thumb? Quite a few, although it does vary across different demographics. The data for these charts comes from the American Housing Survey (U.S. Census). Unsurprisingly, household income plays a major part in the attainability of our golden leverage ratio. Virtually 97% of respondents with a household income greater than $120,000 are able to keep their housing leverage ratio under 30%.

Monthly housing cost as percent of income: By total household income

We can also take a look at the leverage ratio as it fluctuates across several age groups. We still observe a steady decrease in the leverage ratio as the age of respondents increases, but the trend is far less extreme than in the income example above.

Monthly housing cost as percent of income: By age of householder

3 thoughts on “How many people follow the mortgage to income rule of thumb?

  1. Sam

    Love the way you’ve included the image/color in its tool tip. I would have said this was confusing due to the % of total and % of income, but that tooltip helped a lot I think.

    How do you do it (I am assuming this is in Tableau) ? Love it!

    Reply
    1. lytics Post author

      These graphs are actually made using the nvd3 JavaScript charting library. Feel free to check them out at http://nvd3.org (it’s all open source).

      Reply

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