Housing Affordability And The Housing Crisis

1508 WordsDec 6, 20167 Pages
Housing Affordability Housing affordability has been one of the most persistent national concerns mainly because housing costs are the biggest expenses in the budgets of most households. A typical American household spends more than a third of its budget on housing while poor and near-poor households commonly devote about half of their incomes to housing (Consumer Expenditure Survey, 2011) . The majority of studies of housing affordability focus on housing cost and its relationship to household income as the sole indicator of affordability. The main providers of affordability indexes in the US are real estate institutes and government agencies. The National Association of Realtors, for example, publishes a Housing Affordability Index for existing single-family homes by metropolitan area. The NAR affordability index measures whether or not a typical family could qualify for a mortgage loan on a typical home. An index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment, while an index value less than 100 means that such a family cannot afford a median-priced home Likewise, HUD has a standard of affordability that focuses exclusively on housing costs. If the ratio of housing costs to household income is less
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