Here’s the second part in our series on the Housing Affordability Index; and yes, we know (as stated right off the bat yesterday) that while the concept of housing affordability is a good one, the current measures are far from perfect.  (Please don’t email and tell us that again today.)

As stated yesterday, the concept of housing affordability in most venues refers to the capacity to purchase a single family dwelling (home or condo), which critically revolves around the ability to qualify for the purchase mortgage. The Housing Affordability Index is further based upon the ability of the median-income earning family to purchase the median-priced, existing home in a given market, using standard and conventional financing guidelines.

A Housing Affordability Index of 100 represents that the median family income for the market is precisely equal to the income a conventional lender would require for the family to purchase the median-priced home in the market. A value less than 100 indicates the median family income for the market is insufficient to qualify; a value over 100 indicates the median family income for the market is more than enough to buy the median-priced home (or the family can afford a home price above the median-priced home in the market).

So who provides the Housing Affordability Index? The most commonly utilized source of Housing Affordability Index information is the National Association of Realtors, though several University based sources delve into regional data. Two regional examples include The Center for Real Estate Research at Texas A&M University (Texas markets only), and MIT Center for Real Estate (New England markets).

Tomorrow we’ll look at the methodologies most often utilized in making HAI calculations. 

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