NAR-style income test
A 20% down payment is $60,000, leaving a $240,000 loan. Monthly P&I is $1,438.92.
Qualifying annual income = $1,438.92 × 12 ÷ 0.25 = $69,068.16.
Index = $84,000 ÷ $69,068.16 × 100 = 121.62.
Housing affordability index
A housing affordability index measures income against a modeled housing payment. NAR HAI and Atlanta Fed HOAM use different assumptions, so their scores are not interchangeable.
On this page
What does 100 mean?
A housing affordability index compares a median income with the income needed to cover a modeled housing payment. A score of 100 means those incomes are equal under the provider's assumptions. Above 100 means the median income exceeds the modeled requirement; below 100 means it falls short.
Both NAR's Housing Affordability Index (HAI) and the Atlanta Fed's Home Ownership Affordability Monitor (HOAM) use income divided by qualifying income, multiplied by 100. They do not use identical definitions of income or housing costs.
An index of 120 means the modeled income is 120% of the required income. It does not mean 120% of households can buy, or that a home is 20% cheaper. These are market benchmarks, not personal mortgage approvals.
NAR HAI vs Atlanta Fed HOAM
The assumptions below come from NAR's methodology, its current overview, and the Atlanta Fed's HOAM documentation.
| Assumption | NAR HAI | Atlanta Fed HOAM |
|---|---|---|
| Income | Median family income | Median household income |
| Down payment | 20% of the home price | 10% of the home price |
| Payment threshold | 25% of income for principal and interest | 30% of income for the listed ownership costs |
| Costs counted | Mortgage principal and interest | Principal, interest, property taxes, property insurance, and private mortgage insurance (PMI) |
| Coverage | National and regional headline HAI series | National, metro, and counties within metros |
| Home prices | Median existing single-family home price | Three-month moving average of median existing home prices, attached and detached single-family properties |
| Mortgage rate | 30-year effective fixed rate, including points and fees | 30-year fixed commitment rate |
Census definitions distinguish families related by birth, marriage, or adoption from households, which also include people living alone and unrelated occupants. HOAM says household median income is typically lower than family median income. Swapping these denominators changes the result.
HOAM includes more ongoing costs than NAR's P&I test. That does not make it a complete personal budget; its listed components do not include maintenance or every buyer-specific expense. NAR also publishes separate metropolitan affordability material, so the headline HAI's national/regional scope is not its only local research.
Read dates and methods together
NAR's background and methodology retain Federal Housing Finance Board references, and the methodology discusses income availability only through 2017. Do not treat those historical passages as a verified 2026 data recipe. The current overview explains the post-May-2019 shift to a 30-year effective fixed rate based on Freddie Mac rates, points, and fees.
Both tools report monthly measures. HOAM projects annual Census household income to the current month and smooths prices over three months. Match observation periods, release dates, and revisions before comparing scores; this guide does not report current readings.
A hypothetical calculation
These invented inputs are teaching examples, not official scores, current market values, or mortgage quotes. Assume a $300,000 home, a 6% annual fixed rate, and 360 monthly payments. Use hypothetical annual family income of $84,000 and household income of $72,000.
For either loan, monthly P&I equals loan × r ÷ [1 − (1 + r)−360], where r = 0.06 ÷ 12. Round payments to cents before the calculations below.
HOAM-style income test
A 10% down payment is $30,000, leaving a $270,000 loan. Monthly P&I is $1,618.79. Add invented monthly taxes of $250, property insurance of $125, and PMI of $125. Total modeled cost is $2,118.79.
Qualifying annual income = $2,118.79 × 12 ÷ 0.30 = $84,751.60.
Index = $72,000 ÷ $84,751.60 × 100 = 84.95. Costs consume 35.31% of the assumed household income.
The same home passes one modeled threshold and misses the other because the income, loan size, and cost basket changed. At exactly $69,068.16 family income or $84,751.60 household income, the respective example would score 100.
These examples apply NAR's 25% test and HOAM's 30% threshold, not their full data pipelines. The HOAM page prints a rounded 3.33 income multiplier; this example uses the exact 1 ÷ 0.30. PMI is invented, not HOAM's estimate. The common rate does not reproduce NAR's points-and-fees adjustment.
How to interpret a reading
- 1.
Name the measure
Record the provider, income definition, down payment, payment threshold, and included costs. An unlabeled score is incomplete.
- 2.
Match place and period
Compare the same geography and observation month. Check release dates, revisions, price smoothing, and projected income.
- 3.
Separate level from change
Above 100 describes the modeled income cushion. A rising score describes improvement within that series, not guaranteed improvement for every buyer.
- 4.
Check the driver
A lower price or rate, or higher income, can raise affordability with other inputs held constant. Taxes and insurance also affect HOAM.
- 5.
Keep the individual separate
Assess actual credit, debts, documented income, cash for the down payment and closing, and lender rules outside the index.
A median is not everyone's income or everyone's purchase price. Even at 100 or higher, lower-income households and buyers without the assumed cash can remain excluded. An index is not a forecast of home prices, investment returns, or financing availability.
Rental affordability is different
HUD's rental cost-burden research considers rent and utilities relative to income. Purchase indices instead model a home price, a down payment, and financing costs. Even when a rental benchmark uses 30%, check its income and cost definitions rather than substituting HOAM.
Neither index alone answers whether to rent or buy. For market demand, pair affordability with residential absorption rate or commercial net absorption; those measure sales pace or changes in occupied space, not household purchasing capacity.
Frequently asked questions
QUICK ANSWERS
It means the provider's median income equals the income required for its modeled housing payment. Above 100 means income exceeds that threshold; below 100 means it falls short. The result depends on the provider's costs, down payment, geography, and income definition.
NAR uses median family income, a 20% down payment, and a 25% principal-and-interest threshold. HOAM uses median household income, 10% down, and a 30% threshold that includes taxes, property insurance, and private mortgage insurance. Their inputs and geography also differ.
No. An index compares modeled payments with a median income. It does not assess your credit, existing debts, income documentation, available down payment, or a lender's requirements. It is neither mortgage approval nor a personal affordability assessment.
No. Rental affordability compares rent and relevant utility costs with income. A purchase index models a home price and financing assumptions. A shared percentage threshold does not make the measures interchangeable, and neither index alone settles a rent-versus-buy decision.
How we reviewed this
We compared the providers' explanations, not current place rankings. NAR restricts nonmember data reproduction without prior written consent. No permission is assumed here. This guide uses attributed explanations and original hypotheticals, not official numerical datasets or charts.
Sources
Provider methodologies