July 3, 2025
- Elizabeth Ackerman
- Jul 21
- 4 min read
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.
Newsom signs major rollback of CEQA reviews, with a big carve-out for big tech
Gavin Newsom claims it’s the “most consequential housing reform in modern history” that he just exempted most urban housing projects from environmental review, as the new state budget has some additions that hope to weaken the notorious CEQA.
A very nerdy policy topic we often discuss is the 55-year-old California Environmental Quality Act abbreviated as CEQA (pronounced “SEE-kwa”). It’s an environmental law signed by Governor Ronald Reagan in 1970 when Nixon was in the White House, at a time when the Republican Party felt very differently about environmental conservation.
CEQA was designed to ensure legislators conducted full reviews of all environmental impacts that might result from proposed large development projects, but the courts expanded it to allow any common folk to challenge developments. Those challenges could be about major issues like air pollution and traffic, or more frivolous issues like shadows or considering “people as pollution.” These challenges often led to red tape and lengthy, costly litigation that held up some major housing developments. But on Monday, in what Governor Gavin Newsom is calling “Holy Grail reform,” KTVU reports that Newsom has signed a budget bill that purports to be a major rollback of CEQA.
Trump administration moves to count crypto as a federal mortgage asset
CNBC
In a landmark shift for the U.S. housing finance system, the Federal Housing Finance Agency has issued a directive ordering Fannie Mae and Freddie Mac to formally consider cryptocurrency as an asset in single-family mortgage loan risk assessments. The move, signed by FHFA Director William J. Pulte on Wednesday, signals a new era of crypto integration into traditional financial infrastructure — this time within the core of American home lending.
The order directs both housing finance giants to develop proposals that include digital assets — without requiring borrowers to liquidate them into U.S. dollars prior to a loan closing. Pulte said in a post on X that the move aligns with President Donald Trump’s vision “to make the United States the crypto capital of the world.”
Berkeley City Council permits denser housing construction in flats
The Daily Californian
The Berkeley City Council unanimously adopted an ordinance at its special meeting Thursday that changes the city’s zoning code to allow for “middle housing,” such as duplexes and triplexes, to be built in previously single-family residential zones. The changes include the revamping of building standards to allow for bigger and taller structures to be constructed, loosening permit requirements for the construction and demolition of homes and merging the R-1A and R-2 low-density districts due to their similarity. An exception is made for hillside neighborhoods, which will not be subject to these changes.
A supplemental by District 1 Councilmember Rashi Kesarwani also increased the limit on the number of dwelling units per acre to 70 across all lower-density districts. Additional supplementals by District 4 Councilmember Igor Tregub and District 8 Councilmember Mark Humbert directed the building standards to consider issues such as loss of yard space and solar access and referred to the planning staff to provide annual quantitative reports regarding the status of middle housing projects, respectively.
Homeownership: not enough supply for middle-income buyers
New York Times
In an ideal housing market, there would be a home that is affordable for every household based on income, from the lowest earners all the way to the wealthiest buyers. That kind of balance is hard to achieve, but as a new report reveals, middle-income households are being squeezed out of the market, even as listing inventory rebounds from its post-pandemic lows.
According to the 2025 Housing Affordability & Supply report from the National Association of Realtors and Realtor.com, middle-income earners, who make up the largest share of the nation’s households, have seen the greatest improvement in housing supply among all income groups. And yet, they can afford only 21.2 percent of all available listings. That’s up from 20.8 percent a year ago — but a far cry from the 49 percent they could afford in 2019. The report, which sorted households by income level to examine the balance of purchasing power, defined “middle-income” households as those earning $75,000 annually, and showed that this demographic faced the largest housing shortage among all groups.
Mortgage refinance demand surges, as interest rates drop further
CNBC
Mortgage rates fell last week to the lowest level since April, leading current homeowners to seek savings. Applications to refinance a home loan rose 7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 40% higher than the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.79% from 6.88%, with points falling to 0.62 from 0.63, including the origination fee, for loans with a 20% down payment. That rate is 24 basis points lower than the same week one year ago.
“This decline prompted an increase in refinance applications, driven by a 10 percent increase in conventional applications and a 22 percent increase in VA refinance applications,” said Joel Kan, vice president and deputy chief economist at the MBA. “As borrowers with larger loans tend to be more sensitive to rate changes, the average loan size for a refinance application increased to $313,700 after averaging less than $300,000 for the past six weeks.”
