How affordable is housing for potential buyers? Today’s Housing Affordability Index produced by the National Association of Realtors® yields some insight—the best in decades.
- The headlines have recently screamed about record low mortgage rates and still soft house prices. How does this translate into affordability for potential buyers? NAR combines this information along with data on median family income into a Housing Affordability Index—an index designed to track how affordable a median priced home is to a median income family. The data show that the median priced home is more affordable to the median income family than is has been in decades.
- In short, the higher the index the more affordable the median priced home is for the median income family. (A more detailed explanation is available at this footnote.) November’s index is the second highest on record. The highest index on record was the previous month, October 2011. For a full look at the data, click here.
- Of course, affordability is only one aspect potential home buyers are likely to consider when deciding whether now is the right time to purchase. Family situation, work situation, and the desire to own a home are all important considerations motivating buyers according to the Profile of Home Buyers and Sellers. Additionally, potential buyers will weigh the affordability of buying against the alternative of renting. NAR has several resources that equip you to help your clients with this decision including a field guide, rent vs. buy brochure, and regular short articles on our blog.
 An index of 100 means that the family with median income earns exactly the income needed to qualify to purchase the median priced home. Anything greater than 100 signals that the median income family has more income than is necessary to qualify to purchase the median priced home, and the greater the index, the greater the median income is relative to the qualifying income. Conversely, an index value less than 100 indicates that the median income family does not have enough income to qualify to purchase the median priced home.