The Housing Affordability Index measures a median income household’s ability to afford a median priced home. This is examined on both national and regional levels based on the most recent price and income data.
An index value of 100 means that a median income household has exactly enough capacity to afford a median priced home. In May, the Twin Cities Housing Affordability Index dropped to 144. Therefore, the financial capacity to purchase was slightly less than 1.5X what was necessary. Without any context, that number might sound great. To put that in perspective though, in 2012, at the peak of housing affordability, the Twin Cities Housing Affordability Index was at 280 (nearly double what it is now), meaning that same buyer would have had nearly 3X the necessary income to purchase the same home.
We expect affordability to continue to decline until the market reaches
a balance point with respect to housing inventory vs. active buyers. We believe this will happen within 1-2 years which is healthy for the mar
