What Does Housing Affordability Mean?

 In Blog, Real Estate Questions

“Affordable housing” or “housing affordability”are terms that we have heard all too often. But what does it truly mean and how can it help you decide whether it is a good time to buy? Those are questions that will be addressed in this article.


Housing affordability or affordable housing describes how affordable it is to buy, own, or rent a house. How it is measured is by the percentage of your household income. The way it works is that it calculates how much you have to spend on housing each month.  According to government standards, anything over 30% of your household income is considered unaffordable.  The National Association of Realtors (NAR) recommends an average of 25%. This means that no more than 25% of your pre-tax income is spent on mortgage payments, taxes, insurance, and utilities.




Based on this definition, there are ultimately 3 things that affect housing affordability or affordable housing:

1. Home prices
2. Mortgage rates
3. Household income


In this case, if the prices for homes or the mortgage rates go down, you can afford a bigger size of a home for the same payment, so therefore affordability goes up. Household income is different and therefore it has an opposite effect. If your income decreases, affordability goes down since you can afford less size of a home. It is important to take into consideration all of those 3 factors.

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