The Housing Affordability Index

The Housing Affordability Index, a standard adopted by the National Association of Realtors (NAR), measures the financial ability of consumers to buy a home. The index compiles three factors:

• median income
• median house cost
• median mortgage rates

According to NAR, all these three factors are today historically favourable than 5 years ago. An index of 100 indicates that a family earning the median income has exactly enough to qualify for the going mortgage rate to purchase a median-priced home. Anything over 100 shows that the median family has more than enough income to qualify, indicating that houses are particularly affordable at that time. According to the NAR, in January 2011, the Housing Affordability Index Natiowide was 177.8.

The survey of 1,261 home buyers who bought a house between July 1 and Dec. 31, 2010 found that 28% said “favorable financing” motivated them to buy a home in 2010 more than twice as high a share as in 2008, when 14% said that “favorable financing” had moved them to buy a house.

For more information visit: http://blogs.wsj.com/developments/2011/01/18/survey-affordability top-reason-for-home-buying-in-2010/

- Sara Giordano