What Recent Drop In Housing Affordability Index Means

Performance Property Real Estate Question

Q: I just read that housing affordability just reached a new low. What does that mean? Cliff, Bergenfield, NJ

A: The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home based on the most recent home price and income data. An affordability index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. The Housing Affordability Index dropped to 98.5 in June, its lowest rate since 1989. This means that it was more expensive to buy a U.S. home in June than it has been for any month in more than three decades, as record-high home prices collided with higher mortgage rates. Home prices in most places in the US continue to climb and mortgage rates have more than doubled in the past year. Thanks for your question, Cliff.
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