Around the 12th of each month, SFAR puts out a comprehensive Market Focus report for members highlighting the latest market numbers. The reports include everything from median sales prices, to inventory levels, to the number of sales in each District. We've recently been getting questions on how the Housing Affordability Ratio figure within the report is calculated.
Housing Affordability Ratio
What It Is: A measurement of how affordable a region's housing is to its consumers. A higher number means greater affordability.
How Its Calculated: Using proprietary algorithms, the index is a composite score based upon three factors: median sales prices, the prevailing interest rate and the median household income for the region. The median household income is defined by the U.S. Department of Housing and Urban Development (HUD) and available at www.huduser.org/portal/datasets/il/il14/index.html. The counties used include: San Francisco, San Mateo, Alameda, Contra Costa, and Marin Counties.
How It's Frequently Flubbed: The most common error of interpretation is to assume that zero is absolute or that the index maxes out at 100%. An index of 120 means the median household income was 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. Just keep in mind that the higher the number, the more affordable a market's housing is.
You can download the latest copy, and past copies of Market Focus by logging into my.sfrealtors.com and clicking on Market Statistic in the dropdown menu under Documents.