What Is The Housing Affordability Index?

The housing affordability index (HAI) basically measures whether a typical family can qualify for a mortgage loan on a typical home at the prevailing interest rate with a 20% down payment. 

A typical family is defined as one earning the median family income in the area. A typical home is defined as the median-priced existing single-family home. The prevailing mortgage interest rate is the effective rate on loans closed on existing homes from the Federal Housing Finance Board. 

A housing affordability index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, and a value below 100 signifies that a family earning the median income does not have enough income to qualify for a mortgage on a median-priced home.

The calculation assumes a qualifying ratio of 25 percent, which means the monthly principal and interest payment on the loan cannot exceed 25 percent of the median family monthly income.

That's alot of assumptions, and the figures may be skewed a bit, but the significance is that homes are becoming less affordable. When you combine higher home prices with higher mortgage costs you see housing affordability drop. That’s exactly what happened in the past several months. 

Here are the HAI's for our local area as reported by the Hudson Gateway Association of Realtors for 2Q 2022 compared to 2Q 2021:

County 2021 2022
Dutchess County 133 94
Orange County 146 99
Putnam County 97 69
Ulster County 141 95
Westchester County 80 59

Although buyers are paying more for their homes than they were, the demand for homes in the Hudson Valley is still very high.

At the beginning of the pandemic when shutdowns were mandated, this forced nearly all Americans to spend time at home on a 24/7 basis. That new reality caused many to recognize that if they were to live, work, and learn at home they needed a bigger space. Many people left New York City for larger suburban or rural spaces causing home sales in the Hudson Valley to skyrocket.

While low housing inventory, rising interest rates and persistent inflation have had their impact, the Hudson Valley real estate markets have continued to show incredible resiliency. And while the market has, in some instances, slowed compared to the over-heated market conditions of 2021, comparisons to the pre-pandemic market of 2019 show very stable conditions. 

If you have questions about buying or selling your home or property, please CONTACT US.  We can answer all your questions and get you moving!