The 28 Percent Rule for Housing: Still Worth It in Northern New Jersey?

Thinking about buying a home in Northern NJ? Learn how the 28 percent rule for housing costs applies today in Essex, Passaic, Morris, Bergen, Union, Sussex, and Hudson counties, and why it still matters in 2025.

Buying Smarter in Northern New Jersey

Purchasing a home is one of the biggest financial decisions you can make. The 28 percent rule, which says to keep your monthly housing costs at or below 28 percent of your gross income, has been around for years as a guide to affordability. But with today’s market in Northern New Jersey, does it still hold up?

What the 28 Percent Rule Really Means

This guideline says that your housing costs — including your mortgage principal and interest, property taxes, and insurance — should not exceed 28 percent of your gross monthly income.

For example, if your income is $8,000 before taxes, your housing expenses should stay near $2,240 or less. The idea is simple: avoid stretching your budget so far that your home becomes a financial strain instead of a place to thrive.

The Market Reality in Northern NJ

Home Prices

• Statewide: The median home sale price in New Jersey was about $565,000 in early 2025, up more than 13 percent from the previous year.

• Bergen County: Median sale price hovers around $800,000.

• Passaic County (Wayne): Homes sell in under 30 days, with a median price near $664,000.

• Essex, Union, and Hudson counties: Popular commuter towns like Montclair, Maplewood, and Hoboken continue to see strong buyer demand.

• Sussex and Morris counties: Buyers look here for more space and relatively lower taxes, though prices are climbing as people push farther out from the city.

Affordability Pressure

New Jersey ranks among the least affordable states, with typical households needing close to six years of income to cover a median-priced home. That means the 28 percent rule is harder to follow but more important than ever.

Renters on the Rise

Suburbs such as Harrison, Union City, West New York, Passaic, and Elizabeth now have more renters than homeowners. Harrison tops the list with over 80 percent of housing stock being rental units. This trend shows how affordability challenges are pushing more residents toward renting.

Mortgage Rates

Right now, 30-year fixed mortgage rates are holding in the mid-6 percent range, between about 6.5 and 6.8 percent. While not at historic highs, they still add weight to monthly payments. With rates unlikely to drop dramatically in the short term, buyers need to budget with care.

How to Stay on Track with the 28 Percent Rule

• Work on your credit. A stronger score can help you qualify for better rates.

• Increase your down payment. More money upfront reduces your loan amount and makes your offer stand out.

• Shop insurance carefully. Premiums can vary widely, so it pays to compare.

Why It Still Matters

The 28 percent rule is not outdated. In a high-cost area like Northern New Jersey, it gives buyers a realistic boundary line. Going beyond that number might feel necessary to get the home you want, but it leaves little room for rising taxes, insurance hikes, or unexpected repairs.

A home should bring you stability and comfort, not financial stress. Keeping the 28 percent rule in mind can help ensure your home feels like a blessing, not a burden.

Let’s Talk About Your Town

Whether you’re eyeing Montclair in Essex, Wayne in Passaic, Morristown in Morris, Ridgewood in Bergen, Summit in Union, Hopatcong in Sussex, or Hoboken in Hudson, I can help you run the numbers (or put you in contact with a trusted mortgage professional) and navigate this market with confidence.

Ready to explore your options? Let’s connect.