"HAI - Housing Affordability Index" is a term I'm sure you hear quite a bit in today's market, probably mostly because people are focusing on making everything in their life more affordable. So the question is, what is the HAI? Basically, it is an estimate of a housing price based on the price of the median sale price of an existing home, median income, mortgage rates and other assumptions regarding down payment, property tax and insurance.

Okay, so the simplified version would be that a typical family with the exact amount of income could qualify for a mortgage on a typical home. Your score or value would need to be 100 in order to qualify for HAI. So, what’s “typical?” In this case, typical is defined in this scenario as a family earning the median family income as reported by the U.S. Bureau of the Census. Anything that ranks higher than a 100 composite HAI score means that the family would be more able to afford a median priced home in that market. For instance, if you received a composite HAI of 120, that would equate to you having 120% of the income needed to meet the criteria for a conventional loan covering 80% of a median priced existing single family home. However, this number also plugs in a down payment of 20% and a ratio for qualifying of 25%. Meaning your monthly payment would not exceed 25% of the median family income (monthly).

This calculation is however a bit deceiving in my oppinion because it assumes a down payment of 20% of the home price along with a qualification ratio of 25%. What does this all mean? It means that the monthly P & I (principle and interest) payments will not exceed 25% of the median family income (monthly). So, if the median family income is $4,000, your monthly P & I payment would not exceed $1,000. Take a look at this chart released by the National Association of Realtors to get an idea of the HAI in your region. That is my take on HAI - Housing Affordability Index - How it is calculated.

 

2 Comments on HAI - Housing Affordability Index - How is it calculated?

MAR
24
2011
143,179 Points 1 Featured Post Attended Rain Camp

Some of the formulas used in real estate by both the industry or the government are outdated and haven't been changed in decades. Maybe it's time t update some of them?
4:14pm • #1

Agreed, especially in times like these!
5:06pm • #2


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