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.