Considering a move to a new state? It’s essential to assess housing affordability in your desired relocation area.

Considering a move to a new state? It’s essential to assess housing affordability in your desired relocation area.

Duane Duggan

Duane Duggan, Realtor and Author RE/MAX of Boulder

Considering a move to a new state? It’s essential to assess housing affordability in your desired relocation area. The National Association of Realtors® (NAR) offers a tool for this purpose. NAR has diligently tracked this index nationwide for years, providing insight into its change over time. The index is updated monthly by NAR, facilitating easy comparisons and informed decisions.

The index assesses whether a “typical” family could afford a mortgage on a “typical” home, but what defines “typical”? For calculation purposes, the typical family (or buyer if not a family) refers to those earning the median income nationally and locally. Income data from the U.S. Census Bureau is utilized. The typical home is the median-priced single-family home nationally, reported monthly by NAR, and in your researched area.

The next factor taken into account is the prevailing interest rates for mortgage loans. NAR uses the effective interest rate on loans closed on existing homes as published by the Federal Housing Finance Board. 

But wait, there’s more! A couple more assumptions need to be made. The calculation is going to assume two more factors. First, a down payment of 20% of the home price. Second, a qualifying ratio of 25%. A qualifying ratio of 25% means the monthly principal and interest payment cannot exceed 25% of the median family’s income.  

If you are interested in the entire formula used to compute the index, the exact calculations are available on the NAR website. For purposes of this article, let’s just talk about the results of the algorithm. Once the calculations have been applied and a number comprising the index as a result, what does it mean?  

A value of 100 means that a median-income family has the exact amount of income to qualify for the monthly mortgage payment at the current interest rate for a median-priced home. When the index rises above 100, that means the median income earned has more than enough income to qualify for a median-priced home. Expressed another way, an index of 120, means that the income earner has 120% of the income required to buy the median-priced home. As that number increases to say 150, the income earner has 150% of the income needed, which in turn means as the index goes up, affordability goes up. At the other end of the scale, an index of 80 means the income earner is only making 80% of what is required to buy that median-priced home, which in turn means homes are less affordable.

Remember, all real estate is local, so national statistics don’t really mean very much. It would be like getting a national average temperature in a weather report to decide whether to wear a coat to work. You get the idea: Minneapolis is vastly different from Miami. Remember above 100 is the index baseline. The higher the number indicating the highest affordability. Housing was the most affordable shortly after the recession ended. The inventory shortage has created the lowest, least affordable, index in years.

Let’s take a look at a sample of the data:  

2019 2020 2021 2022
98.5 105.4 97.1 71.7

Colorado Springs                    
133.1 144.4 122.2 95.5

118.2 129.9 107.9 79.9

Los Angeles/Long Beach
60.7 66.3 54.9 43.1

Contact a Realtor® in the area to which you are relocating and they will have the resources to obtain the index for that area.

By Duane Duggan. Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a Realtor® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail [email protected], call 303.441.5611 or visit