Definition
Housing affordability index measures whether typical homes are affordable for typical families. Index above 100 means homes are affordable; below 100 means affordability challenges. Declining index indicates homes are becoming less affordable.
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Housing affordability index measures the relationship between home prices and income. Index values above 100 indicate homes are affordable (payments less than 30% of income), while values below 100 indicate affordability challenges. The index is tracked by the National Association of Realtors and varies significantly by market. Declining affordability index values indicate homes are becoming less affordable relative to incomes, potentially constraining demand. Affordability limitations can slow price appreciation and create demand concerns.
Pro Tip
Monitor housing affordability trends. Declining affordability eventually constrains demand and can signal coming market softening.
Example
A housing affordability index of 95 indicates typical homes are slightly less affordable—median family income would need to be 5% higher to afford median-priced homes.