The Housing Affordability Index: What It Is and Why It's at Historic Lows

If you want to understand how broken American housing has become, you don't need anecdotes about bidding wars or stories about families living in cars. You need one number: the Housing Affordability Index. Published monthly by the National Association of Realtors (NAR), this index is the single most comprehensive snapshot of whether ordinary Americans can afford to buy a home. And right now, it's telling a story that should alarm everyone.

The HAI currently sits in the range of 90 to 95 — the lowest sustained reading since the early 1980s, when mortgage rates exceeded 18%. That comparison alone should give you pause. We are living through an affordability crisis that rivals the worst period in modern American housing history, and unlike the 1980s, there's no single lever to pull that will fix it.

What Is the Housing Affordability Index?

The Housing Affordability Index, maintained by the National Association of Realtors since 1971, measures whether a typical American family earns enough income to qualify for a mortgage on a typical home. It's designed to be a straightforward, apples-to-apples comparison across time.

The magic number is 100. When the index equals 100, it means a family earning the median household income has exactly enough income to qualify for a conventional mortgage on the median-priced existing single-family home. Above 100 means homes are more affordable; below 100 means they're less affordable.

For decades, the index hovered between 120 and 180, meaning housing was generally within reach for middle-class families. During the mid-2010s, it even exceeded 170 as low mortgage rates temporarily boosted buying power. Those days are gone.

How the Index Is Calculated

The NAR's methodology combines three inputs, each of which tells its own story about affordability:

1. Median existing-home sale price. This is the price at which half of all existing homes sold for more and half sold for less. As of late 2025, the national median sits at approximately $412,000 — up from $172,000 in 2000 and $277,000 in 2015.
2. Median family income. The Census Bureau's estimate of what the middle American family earns. Currently approximately $102,000 — up from $51,000 in 2000, but nowhere close to keeping pace with home prices.
3. Prevailing mortgage rate. The average rate on a 30-year fixed conventional mortgage. Currently hovering near 6.8%, down from the 7.8% peak in late 2023 but far above the 2.65% low of January 2021.

The NAR calculates the qualifying income — the income needed to make monthly payments (principal and interest) on an 80% loan-to-value mortgage at the prevailing rate, with payments not exceeding 25% of gross income. The HAI is then the ratio of median family income to that qualifying income, multiplied by 100.

The formula sounds technical, but the insight is simple: it tells you whether the math works for a middle-class family trying to buy a middle-class home.

The Double Squeeze: Why This Time Is Different

In past affordability crunches, one factor was usually the culprit. In the early 1980s, it was mortgage rates — rates exceeded 18%, but homes were relatively cheap. In 2006, it was prices — the bubble inflated home values, but rates were moderate at 6-7%. In each case, relief came when the one overheated factor corrected.

Today, Americans face something far worse: both variables are working against them simultaneously.

In the 1980s, a buyer could wait for rates to fall and scoop up a cheap house. In 2006, a buyer could wait for the bubble to pop. In 2026, prices remain elevated because of constrained supply and institutional ownership, while rates remain elevated because the Fed can't cut aggressively without reigniting inflation. There is no single correction coming.

Price-to-Income Ratios: The Metro-Level Picture

The national HAI obscures enormous regional variation. In some metros, the affordability picture is not merely bad — it's absurd. The price-to-income ratio, which compares the median home price to the median household income, reveals the depth of the crisis in specific markets.

A price-to-income ratio of 3:1 was long considered the benchmark for a healthy, affordable housing market. At 5.3:1 nationally, the United States has already blown past that standard. In California's major metros, ratios above 10:1 mean that homeownership is functionally impossible for anyone who isn't already wealthy, doesn't have family money for a down payment, or hasn't been riding the equity escalator for decades.

The 28% Rule vs. Reality

For generations, financial advisors used the "28% rule" — no more than 28% of gross monthly income should go to housing costs (mortgage payment, property taxes, and insurance). This wasn't an arbitrary guideline; it was the threshold lenders used to qualify borrowers and the standard that kept families from becoming house-poor.

That rule has become fiction for millions of Americans.

When more than half of recent homebuyers are spending over 30% of their gross income on housing, and more than one in four are spending over 40%, the system isn't stressed — it's broken. These families have less for retirement, less for emergencies, less for their children's education, and less for the consumer spending that drives economic growth.

First-Time Buyers: Locked Out

The aggregate data is bad. The first-time buyer data is catastrophic. The NAR publishes a separate First-Time Buyer Affordability Index that uses the same methodology but substitutes the median income of renters aged 25-44 — the population most likely to be aspiring first-time buyers.

This index currently stands near 63, meaning first-time buyers earn only 63% of the income needed to qualify for a median-priced home. They would need a 59% increase in income or a comparable decrease in home prices to reach the qualifying threshold.

The practical consequences are visible in the data: the median age of first-time buyers has risen to 36 years old, the highest ever recorded. The share of first-time buyers in total purchases has fallen to 24%, down from the historical average of 40%. An entire generation is being priced out, and the wealth gap between homeowners and renters continues to widen.

Why Government "Solutions" Haven't Moved the Needle

Federal and state governments have spent decades trying to make housing more affordable through demand-side interventions: FHA loan programs, first-time buyer tax credits, down payment assistance, government-sponsored mortgage guarantees, and subsidized interest rates.

None of these programs have improved the HAI because they all make the same fundamental error: they increase demand without increasing supply. When you give a buyer $10,000 in down payment assistance, you don't make homes cheaper — you give that buyer $10,000 more to bid with, which gets capitalized into higher prices. Every demand-side subsidy in a supply-constrained market is ultimately a subsidy to the seller, not the buyer.

The affordable housing tax credit (LIHTC) produces roughly 100,000 units per year at enormous cost per unit. Meanwhile, the country needs an estimated 3.8 million additional homes just to close the current shortage. Government programs are fighting a tsunami with a teaspoon.

The Free-Market Path to Improving Affordability

If demand-side subsidies can't fix affordability, what can? The answer lies in attacking the supply side — removing the government-imposed barriers that prevent the market from building enough homes where people want to live.

1. Zoning reform. Exclusionary single-family zoning in high-demand metros artificially restricts supply. Allowing duplexes, triplexes, and accessory dwelling units in residential zones would add millions of units without a dollar of government spending.
2. Permitting streamlining. The average time to approve a new housing development in California exceeds 2.5 years. In Houston — which has no traditional zoning — it's a matter of months. The data shows that less regulation correlates with more affordable housing.
3. Reducing regulatory costs. Impact fees, inclusionary zoning mandates, and building code requirements beyond safety add an estimated $93,000 to the cost of a new home, according to NAHB data. Many of these costs are passed directly to buyers.
4. Sound monetary policy. The Federal Reserve's role in inflating housing cannot be ignored. Rules-based monetary policy that prevents asset bubbles would stabilize prices over the long term.
5. Ending market-distorting subsidies. Programs that funnel cheap credit into housing inflate prices. Phasing out the mortgage interest deduction and reducing the footprint of Fannie Mae and Freddie Mac would let market pricing return.

These aren't theoretical proposals. Markets that have implemented supply-side reforms — Tokyo, Houston, and more recently Minneapolis — have seen slower price growth and better affordability outcomes than comparable cities that rely on demand-side intervention.

What the Index Is Really Telling Us

The Housing Affordability Index at 93 isn't just a number. It's a verdict on decades of policy failure — from the Federal Reserve's monetary experiments to local governments' refusal to allow building, from Washington's addiction to demand-side subsidies to the regulatory apparatus that adds six figures to the cost of every new home.

The index will improve only when policymakers stop trying to make unaffordable homes easier to finance and start making it possible to build affordable homes in the first place. Until then, the HAI will remain a precise, damning measurement of how thoroughly the American housing market has been distorted by government intervention at every level.

The math doesn't lie. A median-income family cannot afford a median-priced home in America. That's not a market failure — it's the predictable result of policies that restrict supply, inflate demand, and corrupt the price signals that would otherwise guide the market toward equilibrium.