Is there a challenge with Affordability in the Current Housing Market?
As homes increase in value, they can become less affordable if the increase in value is greater than the increase in the spending power of home buyers.
If homes become less affordable, there is a risk of the homes dropping in value again.
So how does the housing market look right now?
Let's take a look at the Housing Affordability Index to find out.
The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.
Basically a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median priced home at the time.
Anything above 100 means the family has more than enough to qualify.
The higher the score the easier it is.
Whilst the increase in home prices is causing a decrease in affordability, homes are significantly more affordable now than they have been historically.