The Housing Opportunity Index (HOI) for a given area is defined as the share of homes sold in that area that would have been affordable to a family earning the local median income, based on standard mortgage underwriting criteria. Therefore, there are really two major components — income and housing cost.
Nationwide, 63.2% of new and existing homes sold in the fourth quarter of 2019 (October through December) were affordable to families earning the U.S. median income ($75,500). This is virtually unchanged from the third quarter of 2019. Mortgage rates and home prices remained relatively stable throughout the last two quarters of 2019, which is why affordability held steady.
- The NAHB/Wells Fargo Housing Opportunity Index (2012-Current)
- The NAHB/Wells Fargo Housing Opportunity Index: Complete History by Metropolitan Area (2012-Current)
- The NAHB/Wells Fargo Housing Opportunity Index: History of Least and Most Affordable Areas
- The NAHB/Wells Fargo Housing Opportunity Index: Complete Listing by Affordability Rank
- The NAHB/Wells Fargo Housing Opportunity Index: Complete Listing, Sorted Alphabetically
- The NAHB/Wells Fargo Housing Opportunity Index: Least and Most Affordable Areas by Population
- The NAHB/Wells Fargo Housing Opportunity Index: Regional Listing by Affordability Rank
- The NAHB/Wells Fargo Housing Opportunity Index: Regional Listing, Sorted Alphabetically
For income, NAHB uses the annual median family income estimates for metropolitan areas published by the Department of Housing and Urban Development. NAHB assumes that a family can afford to spend 28 percent of its gross income on housing; this is a conventional assumption in the lending industry. That share of median income is then divided by twelve to arrive at a monthly figure.
On the cost side, NAHB receives every month a CD of sales transaction records from CoreLogic. The data include information on state, county, date of sale, and sales price of homes sold. The monthly principal and interest that an owner would pay is based on the assumption of a 30 year fixed rate mortgage, with a loan for 90 percent of the sales price (i.e., 10 percent downpayment). The interest rate is an average of the 30-year fixed effective rate from Freddie Mac's Primary Mortgage Market Survey during that quarter. In addition to principal and interest, cost also includes estimated property taxes and property insurance for that home. This is based on metropolitan estimates of tax and insurance rates from the the most recent American Community Survey. Mortgage insurance is not currently a component of the HOI.
Therefore, for each record, there is an estimated monthly cost and available income share. The HOI is the share of records in a metropolitan area for which the monthly income available for housing is at or above the monthly cost for that unit.