What is the housing affordability index?

The Housing Affordability Index (HAI), published monthly by the National Association of Realtors (NAR), measures whether a typical family earns enough income to qualify for a mortgage loan on a median-priced existing single-family home. An index value of 100 means the median family has exactly enough income to qualify for the mortgage; values above 100 indicate greater affordability, and values below 100 indicate the median family cannot afford the median home.

The calculation assumes a 20% down payment, a 30-year fixed-rate mortgage at the current average rate, and that monthly mortgage payments should not exceed 25% of gross monthly income. The three primary inputs are the median existing-home price, the median family income, and the prevailing mortgage rate. Changes in any of these variables affect the index. The 2022-2024 affordability crisis was driven by the combination of rapidly rising home prices (median price exceeding $400,000) and surging mortgage rates (from 3% to 7%), while income growth, though solid, could not keep pace.

The HAI hit its lowest level since the early 1980s in 2023, dropping below 100 for the first time in decades. This meant that, for the first time in a generation, the median American family could not afford the median home under standard mortgage qualification assumptions. The last time affordability was this constrained was during the Volcker era, when mortgage rates exceeded 16%, but at that time, nominal home prices were much lower.

For the broader economy, housing affordability affects consumer spending, labor mobility, wealth inequality, and social outcomes. When housing becomes unaffordable, first-time buyers are locked out, existing homeowners become reluctant to move (the "lock-in effect" of low-rate mortgages), and a larger share of income goes to housing costs, reducing spending on everything else. The NAR's affordability index provides a concise summary of these dynamics and has become a key input for policymakers debating housing supply, zoning reform, and monetary policy's impact on the housing market.