Home Ownership Affordability Monitor

The Federal Reserve Bank of Atlanta’s Home Ownership Affordability Monitor (HOAM) provides a monthly measure of the median-income household’s capacity to afford the median-priced home at the national, metro, and metro-county levels. HOAM takes into consideration the monthly principal and interest cost, given the current mortgage interest rates, as well as the costs associated with taxes, property insurance, and private mortgage insurance. HOAM uses the US Department of Housing and Urban Development (HUD) standard 30 percent share of income threshold to measure affordability. If the annual cost of homeownership exceeds a 30 percent share of the annual median household income, homeownership is considered unaffordable. Conversely, if the annual cost of homeownership is below a 30 percent share of the annual median household income, homeownership is considered affordable. Alternatively, HOAM allows the user to view affordability using an Affordability Index, where an index value of 100 or above indicates a median-income family could afford a median-priced home; a value below 100 indicates a median-income family would not be able to afford a median-priced home given the current interest rate.

The National View allows the user to analyze various aspects of homeownership affordability at the national level.

The National View includes tabs for National Affordability, Drivers, Affordability Gap, and Cost Breakdown:

Affordability—Provides two measures of homeownership affordability at the national level as users toggle between the parameters of "Share of Median Income" and "Affordability Index."
Drivers—Provides a decomposition of the drivers of homeownership affordability. Affordability drivers include taxes, property insurance, mortgage rate, median sales price, and median household income.
Affordability Gap—Provides a comparison between the actual median income over time to the qualifying income; that is, the income needed for annual homeownership cost to equal no more than 30 percent of annual income.
Cost Breakdown—Provides a decomposition of the total monthly costs of homeownership, given the median sales price and mortgage rate for a given period. Components of the total monthly cost include property taxes, private mortgage insurance, property insurance, and principal and interest.

The Metro View allows the user to analyze various aspects of homeownership affordability at the metropolitan area level.

The Metro View includes tabs for Metro Affordability, Drivers, Affordability Gap, Price/Income, Share of Income, County Level, and Cost Breakdown:

Affordability—Provides two measures of homeownership affordability within US metros by allowing users to toggle between the parameters of "Share of Median Income" and "Affordability Index."
Drivers—Provides a decomposition of the drivers of homeownership affordability within US Metros. Affordability drivers include taxes, property insurance, mortgage rate, median sales price, and median household income.
Affordability Gap—Provides a comparison between the actual median income over time to the qualifying income; that is, the income needed for annual homeownership cost to equal no more than 30 percent of annual income within US metros.
Price/Income—Provides a comparison between median home prices and incomes over time.
Share of Income—Provides the share of median income needed to own the median-priced home over time within US metros compared to the nation as a whole.
County Level—Provides the share of median income needed to own the median-priced home over time within counties and parishes in US metros compared to the United States as a whole.
Cost Breakdown—Provides a decomposition of the total monthly costs of homeownership within US metros, given the median sales price and mortgage rate for a given period. Components of the total monthly cost include property taxes, private mortgage insurance, property insurance, and principal and interest.

The following are the formulas used to calculate the major components of the Home Ownership Affordability Monitor:

Total monthly cost = (P & I) + PMI ((median home price x .9) x .00558) + taxes ((county- or metro-level rate x median home price) ÷ 12) + insurance ((county- or metro-level rate x median home price) ÷ 12).
Monthly principal and interest payment (P&I) = median home price x 0.9 x (interest rate ÷ 12) ÷ (1 – (1 ÷ (1 + interest rate ÷ 12) ^360)).
Total annual cost = total monthly cost x 12
Annual share of income = total annual cost ÷ median household income
Qualified income = total monthly cost x 3.33 x 12
Index value = (median income ÷ ATI) x 100.

This tool relies on the following data inputs and assumptions:

HOAM Index Input	Description	Source
Median household income (a)	Median	US Census Bureau's American Community Survey one-year estimates
Median existing home sales price (b)	Median, monthly three-month moving average	Zonda Home
Mortgage interest rate (c)	30-year fixed-rate mortgage—commitment rate	Freddie Mac Primary Mortgage Market Survey/FRED
Property taxes (d)	Metro- and county-level (median)	Derived from SmartAsset
Property insurance (e)	State- and county-level (average, annual)	ICE McDash Analytics
Down payment (f)	10% of home price	Black Knight Financial Services
Private mortgage insurance (PMI) (g)	0.558% of home mortgage amount	Federal Housing Finance Agency

For more detail, please see the definitions below.

a. Median household income: The US Census Bureau's American Community Survey (ACS) one-year estimates produce household income measures, which include the incomes of the head of household and anyone else in the household who is 15 years or older, regardless of the relationship to the head of household. The median represents the midpoint income within the distribution of incomes, meaning 50 percent of households earn more and 50 percent earn less. While the incomes are based on household estimates from the ACS, they are projected to the current month by Atlanta Fed staff using additional data series produced by the Current Population Survey and Decennial Census. There is more recent evidence, however, that suggests the single-person household comprises a higher share of overall housing activity. Because of this trend, this tool incorporates household income estimates rather than family income estimates. The distinction is important because median household incomes are typically lower than median family incomes, which has direct implications for affordability measures.

b. Median existing home sales price:The Zonda data reflect the three-month moving average of the median home price for sale observations of all single-family attached and detached properties combined for the geography and period specified. The median existing home sales price represents the midpoint price within the observed repeat sales home prices for the reporting period.

c. Mortgage interest rate:Using the Freddie Mac Primary Mortgage Market Survey and Moody's Analytics as sources, the current 30-year fixed mortgage rate is derived from a weekly survey and based on first-lien prime conventional conforming home purchase mortgages. These mortgages have a loan-to-value of 80 percent, which differs from the loan-to-value of 90 percent in HOAM.

d. Property taxes: The tax component of monthly payments is derived using the effective tax rate at the county or parish level provided by SmartAsset. Metro level tax payments are derived by using a weighted average of county taxes within the area.

e. Property insurance:The ICE McDash data reflect the estimated average annual premium of residential insurance policies per household.

f. Down payment: This tool assumes a 10 percent down payment. According to Black Knight Financial Services, the average loan-to-value on mortgages originated between 2000 and 2019 fluctuated around 90 percent.

g. Private mortgage insurance: The private mortgage insurance estimate is determined by averaging the published Federal Housing Finance Agency's guarantee fees from 2013 to 2018.

h. Note: This tool uses median payment to median income ratio of 30 percent as the affordability threshold.

HOAM metro Data (.csv): This file contains monthly affordability scores per Metro.

HOAM County Data (.csv):This file contains monthly affordability scores per county.

HOAM US Affordability Data (.csv): This file contains monthly national affordability index, monthly change in national affordability, monthly national median housing payment as a share of income, monthly estimated income that qualifies to purchase a median home vs actual median income differences, and monthly estimated income that qualifies to purchase a median home vs actual income percent difference.