and that the buyer’s housing costs won’t exceed 30% of their gross monthly income

That rule of thumb for how much to spend on housing is also a maximum, not a target.

Most of what American spending increases have gone to over past decades has been housing; the proportion of income we allocate to other things has declined as a share of income. A lot of that has gone to increasing the square footage of houses, while the number of people living in an average household has dropped significantly.

https://www.statista.com/statistics/529371/floor-area-size-new-single-family-homes-usa/

In 2023, the average size of a single-family home built for sale in the United States amounted to 2,514 square feet. Although in the past five years American homes have been shrinking, since 1975, they have almost doubled in size. This trend towards larger homes seems illogical given that the average size of families has shrunk over the same period.

Why are American homes so large?

Homes in the U.S. are among the largest in the world, only surpassed by Australia. There are thought to be several reasons for this, including the concentration of wealth in the country, and the deeply engrained driving culture which means that cheaper land outside city centers is easily accessible.

Where are the largest homes located?

The size of homes also varies regionally, with the largest homes being located in wealthy, urban areas and in the South. Large homes, or McMansions as they’re often called, are especially popular in Texas. In 2023, Milwaukee and Omaha had the largest average home size.

https://247wallst.com/special-report/2016/05/25/the-size-of-a-home-the-year-you-were-born/

In 1920:

Avg. floor area of a new single-family home: 1,048 sq ft
Avg. floor area per person: 242 sq ft
New homes started: 247,000
GDP per capita: $10,164

In 2014:

Avg. floor area of a new single-family home: 2,657 sq ft
Avg. floor area per person: 1,046 sq ft
New homes started: 1.0 million
GDP per capita: $55,762

https://cepr.net/publications/in-the-good-old-days-one-fourth-of-income-went-to-food/

It is certainly true that we are spending a much larger share of our income on housing than in prior decades, but a big part of that story is that we are spending a much smaller share on other things. The graph below shows the share of disposable income going to food, clothes, and household furnishings since the late 1940s.

As can be seen, there has been a sharp reduction in the shares of all three. This is especially striking with food. In 1947 we spent 23.0 percent of our income on store-bought food. This had fallen to just 7.1 percent last year. The share of income going to buy clothes fell from 10.3 percent to 2.6 percent. The share for buying household furnishings dropped from 5.5 percent to 2.5 percent.

These declines freed up income to go to other areas, and one area that extra income went to was housing. The houses we live in today are on average much larger than the ones we lived in 75 years ago. They are also far more likely to have air conditioning and relatively clean sources of heat. (Coal furnaces were still common in the late 1940s.) They are much better protected against fires and less likely to have harmful chemicals like asbestos and lead.

As a result of reduced spending in other areas, and the higher quality of the housing we live in today, the share of our income going to housing now exceeds 34.0 percent, on average. (This figure includes “owner equivalent rent,” the money that a homeowner would be paying to rent the home they live in.)

Around the global financial crisis, there was a bit of a fad for tiny houses:

https://en.wikipedia.org/wiki/Tiny-house_movement

One definition, according to the International Residential Code, a tiny house’s floorspace is no larger than 400 square feet (37 m2).[8][9] In common language a tiny house and related movement can be larger than 400 ft² and Merriam-Webster says they can be up to 500 ft².

While I think that some of that goes a bit over the top, it does provide some perspective; if one person lived alone in such a 500 ft² “tiny house”, even that would be more than double the per-capita square footage that we had in 1920.

To use one example, Elon Musk lives in a 400 ft² prefab after he got into the tiny house thing.

I’m not saying that there aren’t reasons for that. We have air conditioning in 2025, and didn’t in 1920. In 1920, people have might have gone outside for a lot of the time that today, they’d spend inside. We have a lot of appliances and stuff that we didn’t in 1920, and if one wants an electric dryer and washing machine and that sort of thing, it’s gotta go somewhere. But I think that being aware of that is useful to understand where a lot of increases in wealth over time went — in large part, into living in larger, more-elaborate housing.

Even if you compare current US to current other countries, we have pretty large houses.

https://shrinkthatfootprint.com/how-big-is-a-house/