Affordability Index - Explained
What is the Housing Index?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is the Affordability Index?
The Affordability Index, also called the Housing index, measures the tendency of a family with to buy a home, based on their average income,. This index takes into an account the average family income, average price of the home and other related factors, to calculate this tendency.
How is the Housing Index Used?
The Affordability Index is a planning tool developed by the National Association of Realtors to track the trends in real estate. The affordability index calculates the median price of the house and the average income of a US family, and then determines the affordability based on the market revenue. The index also considers disposable income and down payment rates. The Family Accessibility index of 100 developed by the National Association of realtors Association affirms that an average earning family should be able to buy medium-size property. The Housing Affordability Index also calculates different types of mortgages and serve as a criteria to forecast whether the homes will be expensive or cheap in relation to the corresponding mortgage options. If a familys affordability index is positive, it doesn't necessary means that the family can purchase a home. Factors like disposable income, asset holdings, variation in average prices based on locations etc., all affect the scenerio.