A headline says housing affordability fell to its lowest reading in years. You nod gravely, as one does, and then wonder whether to keep renting. Before that decision gets made by a single number, it helps to know what the number is and who built it. Mostly, it is a ratio with opinions baked in.

A kitchen table in soft daylight with two printed news pages, a notepad and a pencil, and a pair of hands comparing the figures.
A reader at a kitchen table comparing two printed housing affordability headlines with a notepad beside them

What an affordability index measures

A housing affordability index is a market-level statistic. It compares typical home prices and borrowing costs in an area with typical incomes in that same area. It describes a region. It does not describe your household, your savings or your landlord.

Most versions divide income by the income needed to qualify for a mortgage on a typical home, then multiply by 100. Each provider picks its own assumptions for that math, which is why two indexes that look alike can give different readings for the same place and time.

The mortgage rate sits inside the arithmetic. So an index can fall while home prices are flat or even dropping. Higher borrowing costs alone can push it down. A headline about worsening affordability does not always mean homes got pricier.

Why the two main US indexes can disagree

The best-known US versions are the National Association of Realtors' Housing Affordability Index (HAI) and the Atlanta Fed's Home Ownership Affordability Monitor (HOAM). Both treat 100 as the point of affordability for a median-income household buying a median-priced home. They get to 100 by different roads.

NAR's approach, as the sources describe it, uses median family income, a 25 percent of income threshold for principal and interest, a 20 percent down payment, the 30-year effective fixed rate including points and fees, and the median existing single-family home price. The HOAM uses median household income, a 30 percent threshold, a 10 percent down payment, the 30-year fixed commitment rate, and a three-month moving average of median existing prices for attached and detached single-family homes.

One more footnote matters. The HOAM counts property taxes, property insurance and private mortgage insurance on top of principal and interest. NAR's test counts principal and interest only. Put the two headlines side by side without checking, and one market can look better or worse purely because of definitions.

Reading the number and its scale

NAR's methodology says a value of 100 means a median-income family has just enough income to qualify for a mortgage on a median-priced home. The Atlanta Fed's explainer says below 100 indicates ownership is unaffordable on its assumptions, and above 100 indicates a median-priced home is affordable for a median-income household.

A higher number is not a bigger share of buyers. An index of 120 means the modeled income is 120 percent of the income required to qualify. It does not mean 120 percent of households qualify. It does not mean homes are 20 percent cheaper than some other benchmark. Percentages are slippery that way.

History helps. According to the source material, the HOAM stood well above 100 from late 2019 through early 2021, then dropped below 65 by the end of 2022. A 2023 analysis attributed that drop to three things: income, interest rates and prices. Asking which of the three moved most in a given period often explains more than the headline does.

Geography, dates and the household behind the number

Check the geography first. The HOAM is published monthly at national, metro and metro-county levels. NAR's headline series is reported at national and regional levels. A national figure says little about one metro, and a county figure may not match the metro it sits inside.

Then check the date and the method together. Providers revise definitions and data series, so a figure from one year may not compare cleanly with one from another.

Finally, look at who is counted. Census defines a family as people related by birth, marriage or adoption. A household includes everyone in a housing unit, including people living alone and unrelated roommates. The HOAM notes household median income is typically lower than family median income. Swap one for the other and the result changes, so a family-based index can look friendlier than a household-based one for the same market.

Related measures and how to use them

The NAHB and Wells Fargo Cost of Housing Index takes yet another angle. It is the ratio of a mortgage payment to median family income. A reading of 34 percent means a typical family would need to spend that share of pre-tax income on a mortgage payment for a median-priced home. The NAHB's Q2 2026 figures in the source material show 34 percent for a new home and 36 percent for an existing home, with national median income of $106,800, a median new home price of $410,700 and a median existing home price of $434,900.

NAHB also tracks existing-home data for 175 metro areas and a low-income series for households earning 50 percent of area median income. Those can show how conditions differ by income group, which one national headline cannot.

None of this replaces a personal budget. These are benchmarks for comparing places and watching change over time. Whether a payment fits a household depends on income, debts, savings, expected expenses and comfort with risk. No index measures those.

Questions and warning signs when reading a headline

A short checklist can slow the headline down:

  • Is the income a family median or a household median?
  • Does the cost measure include taxes, insurance and PMI, or only principal and interest?
  • What down payment and qualifying threshold does it assume?
  • Which mortgage rate and price series does it use?
  • Is it national, metro or county, and when was it published?

Common mistakes are easy to spot once listed. Comparing an NAR reading with an Atlanta Fed reading as if the inputs matched. Reading 120 as 120 percent of households able to buy. Treating an index as a mortgage approval or a full budget, when the HOAM's listed components leave out maintenance and other buyer-specific costs. And forgetting that a median-based index models a typical transaction that may look nothing like yours.

The sources here do not explain how to weigh an index against your own finances, how mortgage rates are set, or how to compare offers. For those, the Consumer Financial Protection Bureau's homebuying resources are a sensible start, and a qualified professional can review your specific circumstances.

Please seek a professional. This article is general information, not financial, tax or insurance advice. Please seek a licensed financial, tax or insurance professional about your own situation.