Make of that what you will.
https://www.longtermtrends.net/home-price-median-annual-inco...
But at any rate both are imprecise rules of thumb because they don't account for interest rates. A mortgage at 2.5x salary costs a lot more this year than it did last year.
- Suppose somebody is making $40k/yr in a smallish town. They keep $33k after taxes, at most $31k after food for two people, $20k after getting health insurance, maybe $18k after gas, insurance, depreciation, and repairs on a single vehicle (or else on cheaper than normal public transit), and if they're lucky maybe they have $17k left on average after all other expenses living with few adornments. Utilities and repairs are a bit hard to divorce from the home value, but as a rough lower bound you can expect at most $15k/yr left if you take another $1k off for repairs and $1k for electricity and water. Your home purchase needs to come out of that $15k/yr or less budget.
- Suppose instead that somebody makes $80k/yr. They keep $60k after taxes and $42k/yr after making the same food, utility, insurance, .... payments. They can afford nearly 3x the home of the first individual, not the 2x a naive salary multiplier would indicate.
That effect is even more pronounced with kids or a lot of the other motivating factors (expenses) that lead people to making home purchase decisions sooner, and the totality of the situation is such that for salary multiplier advice to be reasonable you need to constrain the salary ranges in question so much that you might as well just give bucketed dollar value estimates.
(and similarly as it applies to sizing life insurance policies, saving for kids' colleges, buying wedding rings, ...)
The person making 80k a year perhaps could afford a house more than 3x salary, but that wouldn't necessarily be a good idea, since buying as much house as you can afford is probably bad advice.
I agree that the multiple is insufficient to determine what you can afford. I would certainly do a budget before deciding what I can afford, and a rent vs buy analysis.
Though in my personal circumstances I would say somewhere between 2 and 3 times salary was realistic. At 2.75% interest I bought a house that was around 2.8 times salary. That was a good compromise on housing budget verse other things.
I would even say that a lower price and therefore deposit together with a higher interest rate can make housing more accessible (even if not necessarily more affordable).
Although you can 'afford' more sales price with a monthly payment based on a 0% interest loan vs. a 10% loan, it puts you at greater risk.
With a higher interest loan, you have more slack to potentially refinance in the future. Also, taxes and insurance are based (roughly) on the price of the house, not based on the monthly payment.
The 2.5x-3x annual salary was always a rough rule of thumb, but when I hear people talking about 5-7x their salary... there's very few ways where that house makes sense.
https://www.hud.gov/sites/dfiles/Housing/documents/FHA_SF_Ma...
"In FY 2020, the three most populous states — California, Texas, and Florida — had the greatest counts of FHA-insured mortgage loan endorsements. Together, these states accounted for 28.64 percent of such endorsements."
https://www.ncsha.org/blog/fha-2020-annual-report-shows-fhas...