How Affordable is Owning a Home in your Neighborhood?

While majority of the neighborhoods across the nation have largely recovered from foreclosure crisis, the rising cost of living and owning a home continues to be a growing challenge.  The Housing Affordability Index (HAI) measures whether a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data. 

Housing Affordability Quick Facts

  1. The median sales price of a single-family home increased 7.2% in 2015 based on data from the National Association of Realtors.
  2. The median household income rose 5.2% in 2015 to $56,516, as per the Census Bureau.
  3. Based on these numbers, income is not rising at the same rate as home prices. Should this trend continue, we may see a significant macro-level decline in housing affordability.
  4. The National Association of Realtors reported that housing affordability nationwide slightly declined from 2015 to 2016.

Identifying Neighborhood Distress Requires Granular Data

Following the National Association of Realtors’ methodology, SP Group computed an HAI for each census tract using our proprietary datasets. We identified 13,250 tracts that exhibit housing unaffordability. These tracts comprised 18% of all tracts in the nation. Calculating Housing Affordability at the tract-level allows us to identify a distressed neighborhood in a city with many wealthier neighborhoods, whereas broader geographic analyses, such as at county or state level, have the potential to mask granular pockets of distress. Additionally, calculations of affordability at such a granular geography allow for more targeted, data-driven interventions.

Using the SP Group’s Neighborhood Housing Affordability Tool, we mapped the state of Colorado to demonstrate the variability in results when comparing affordability at a broad versus granular level. As a state, Colorado appears to be affordable with a reasonable HAI (colored in blue), but when we analyze the census tracts within the state at a more granular level, we notice significant concentrations of pockets of unaffordability (shown in orange).  For a copy of our tool and to find out more about your neighborhood request a download here.