should RMSE compared to the magnitude of response variable? My response variable has large magnitudes. The mean is 30000ish in the unit of dollars. Then I can only get the RMSE to ~3 which does not feel too bad to me given the magnitude of the response variable. However I read that RMSE > 1 is considered bad. I should also add that my $R^2$ is extremely good.

Of course you give context for RMSE. While RMSE does not have quite the same interpretation of mean absolute error (or median absolute error), if about half of your errors are within $3$ of gigantic values, that sounds pretty good for values around \$30,000. In other words, you are within about three bucks of the price of a car.
There is no rule about RMSE > 1 being bad. If you scale the $y$ to have a variance of $1$, then such a rule is more reasonable, but even then, it is hard to make an absolute measure of performance with qualitative descriptions like “good” and “bad” that apply in any circumstance without consideration of the context.
