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First of all, what is the Housing Affordability Index anyway and why does it matter?  Here is how the National Association of Realtors defines the index…

 

“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.”

 

A value of 100 means buyers of median income earn enough to qualify for a mortgage on a median priced home based on current prices and mortgage interest rates. An index over 100 indicates buyers should have more than enough income to qualify.

 

Basically, the higher the index the easier it is to afford a home.

 

Some real estate pundits (and regular people!) are concerned that affordability has been declining since its peak index approaching 200 in 2012. It is true that home values have been increasing, making the affordability index decline. But if you look at the bigger picture, it is the market recovery that is causing the index to fall… but not precipitously. As you can see from the chart below from Keeping Current Matters, the index is the lowest it has been since before the crash… but still considerable higher than every year before the crash going back to 1990.

 

Affordability index 1990-2016

These are nationwide figures. How are we doing in the Twin Cities?  Even better. The national Housing Affordability Index is 153… the Twin Cities index in July was 180. It's still a good time to buy.

Sharlene Hensrud, RE/MAX Results – EmailMinneapolis – St. Paul Real Estate Market

HomesMSP Team- SharleneJohnAngela Minneapolis-St. Paul Realtors

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About Sharlene Hensrud

I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.

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