Housing Affordability Index for Contra Costa
The HAI (Housing Affordability Index) for Contra Costa was 34 for Q2 2016, the same as it was Q3 for 2015, but what does that really mean?
What is the HAI?
The monthly housing affordability index provides a way to track over time whether housing is becoming more or less affordable for the typical household. The HAI incorporates changes in key variables affecting affordability: housing prices, interest rates, and income.
The Two methods.
The first is the composite Housing Affordability Index (HAI) published monthly by the National Association of Realtors (NAR). This index measures median household income relative to the income needed to purchase a median-priced house. The second measure is the California Housing Affordability Index. Published Quarterly (since 2006) by the California Association of Realtors (CAR), this index tracks the percentage of California and national households that can afford to purchase a median-priced house.
The NAR HAI index has a value of 100 when the median-income family has sufficient income to purchase the median-priced existing home. A higher index number indicates that more households can afford to purchase a home. HAI = (Median Family Income/Qualifying Income) *100
Qualifying income is derived from the monthly payment on the median-priced existing home, at the current-effective mortgage interest rate. Assuming the borrower has made a 20 percent down payment and that the maximum mortgage payment is 25 percent of gross monthly income. In areas of the Country with lower median home prices it is not uncommon to see HAI over 100.
CAR’s measures housing affordability by tracking the percentage of the national and California households that can afford to buy a median priced house, this number varies from region to region in California as median home price varies from region to region. CARs methodology can be viewed here. CAR produces this number quarterly rather than monthly. The CAR HAI number can never be more than 100.
Where we are now
Using CAR’s methodology, we see that the most recent measure for Q2 2016 * sits at 34%, Unchanged from Q3 2015. (I prefer to use the Q3 number as a gauge because it reflects the market after the usually active Summer months when the housing market is beginning to relax and settle.) Affordability in Contra Costa is slightly higher than the state overall which was at 30% for Q2 2016. This is a bit surprising to me as Contra Costa historically is lower than the state.
* At the time of this writing Q3 2016 HAI had not been released yet,