Currently Reading

Looking at Affordability Through a New Lens


Looking at Affordability Through a New Lens

September 7, 2021
housing affordability
Photo: Андрей Яланский |

Affordability indexes may take mortgage rates, income, and home prices into account, but it’s missing an important piece of the puzzle. Bill McBride, author of the finance and economics blog Calculated Risk, says future return is an important piece of data to factor into affordability. The National Association of Realtors’ recent June housing affordability index shows a decline in affordability. The index based this off of rising family income, mortgage payments, mortgage rates, and home prices. The First American Real House Price Index measures affordability through consumer house-buying power resulting from household income, mortgage rates, and nominal house prices.

In June, housing affordability declined on a year-over-year basis for the fourth month in a row, following two years of increasing affordability. The decline in June occurred even as two of the three key drivers of the RHPI, household income and mortgage rates, swung in favor of greater affordability relative to one year ago.

Here is a description from FirstAm:

The First American Real House Price Index (RHPI) measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time and across the United States at the national, state and metropolitan area level. Because the RHPI adjusts for house-buying power, it is also a measure of housing affordability.

Calculated Risk Affordability Index
I’ve put together my own affordability index - since 1976 - that is similar to the FirstAm approach (more of a house price index adjusted by mortgage rates and the median household income).

I used median income from the Census Bureau (estimated 2020 and 2021), assumed a 15% down payment, and used a 2% estimate for property taxes, insurance and maintenance. This is probably low for high property tax states like New Jersey and Texas, and too high for lower property tax states. If we were including condos, we’d also include HOA fees too (this is excluded).

Read More

Related Stories


Starter Homes Are More Affordable Than Renting (in Some Places)

Rents are soaring to all-time highs and rising at a record pace which, after doing the math, has made buying a starter home more affordable than renting in 24 of the 50 largest metro markets, analyzed by

Market Data + Trends

Mortgages Remain Within Affordable Levels Despite Rising Prices

Though home prices continue up, today’s homebuyers are not overextending themselves financially, unlike they did during the Great Recession. A…

Housing Markets

The Most and Least Affordable Cities for Renters

About 8.8 million Americans were behind on rent payments as of December last year, according to data from the Consumer Financial Protection Bureau…


More in Category


Create an account

By creating an account, you agree to Pro Builder's terms of service and privacy policy.

Daily Feed Newsletter

Get Pro Builder in your inbox

Each day, Pro Builder's editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Save the stories you care about

Lorem ipsum dolor sit amet lorem ipsum dolor sit amet lorem ipsum dolor sit amet.

The bookmark icon allows you to save any story to your account to read it later
Tap it once to save, and tap it again to unsave

It looks like you’re using an ad-blocker!

Pro Builder is an advertisting supported site and we noticed you have ad-blocking enabled in your browser. There are two ways you can keep reading:

Disable your ad-blocker
Disable now
Subscribe to Pro Builder
Already a member? Sign in
Become a Member

Subscribe to Pro Builder for unlimited access

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.