Vizualization by Mike Miciag
We have compiled data reported by Zillow estimating changes in housing affordability over time. Higher index values shown represent less affordable housing for households earning the monthly median income.
Source: Zillow Research.
Zillow offers the following explanation for how its indices area calculated:
“To calculate mortgage affordability, we first calculate the mortgage payment for the median-valued home in a metropolitan area by using the metro-level Zillow Home Value Index for a given quarter and the 30-year fixed mortgage interest rate during that time period, provided by the Freddie Mac Primary Mortgage Market Survey (based on a 20 percent down payment). Then, we consider what portion of the monthly median household income (U.S. Census) goes toward this monthly mortgage payment. Median household income is available with a lag. For quarters where median income is not available from the U.S. Census Bureau, we calculate future quarters of median household income by estimating it using the Bureau of Labor Statistics’ Employment Cost Index. The affordability forecast is calculated similarly to the current affordability index but uses the one year Zillow Home Value Forecast instead of the current Zillow Home Value Index and a specified interest rate in lieu of PMMS. It also assumes a 20 percent down payment. We calculate rent affordability similarly to mortgage affordability; however we use the Zillow Rent Index, which tracks the monthly median rent in particular geographical regions, to capture rental prices.”