Affordability Index


DEFINITION of 'Affordability Index'

A measure of a population's ability to afford to purchase a particular item, such as a house, indexed to the population's income. An affordability index uses the value of 100 to represent the position of someone earning a population's median income, with values above 100 indicating that an item is less likely to be affordable and values below 100 indicating that an item is more affordable.

BREAKING DOWN 'Affordability Index'

An affordability index is most often associated with housing costs. Housing affordability indexes often compare the cost of purchasing a home in different lacations. Points above 100 indicate that a typical family will be less likely to qualify for a mortgage on a home in the area, while a value of 100 indicates that the typical family can just barely afford to live there.

  1. Benchmark

    A standard against which the performance of a security, mutual ...
  2. House Price Index - HPI

    A broad measure of the movement of single-family house prices ...
  3. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  4. New Home Sales

    An economic indicator that measures sales of newly built homes. ...
  5. Index

    A statistical measure of change in an economy or a securities ...
  6. S&P/Case-Shiller Home Price Indexes

    A group of indexes that tracks changes in home prices throughout ...
Related Articles
  1. Investing Basics

    Understanding The Case-Shiller Housing Index

    This index is a widely-used and respected barometer of the U.S. housing market and the broader economy.
  2. Forex Education

    The Big Mac Index: Food For Thought

    You may have heard of this mouth-watering method of evaluating currencies, but make sure you know the whole story.
  3. Home & Auto

    10 Tips For Getting A Fair Price On A Home

    Don't let buying a home bust your budget. Make sure the house you choose is worth the price you pay.
  4. Fundamental Analysis

    Hamburger Economics: The Big Mac Index

    In theory, PPP stands up much better than it does in reality. Find out how to evaluate currencies according to the price of a Big Mac.
  5. Home & Auto

    Buying A Home: New Or Previously Owned?

    Brand-new homes have distinct advantages - and drawbacks. Find out what you need to know to make an informed decision.
  6. Home & Auto

    Are You Ready To Buy A House?

    There are a number of factors, aside from cost, that you should think about before buying a new house.
  7. Home & Auto

    8 Signs Your Neighborhood Is On The Upswing

    If you were hard-hit by the real estate crash, you may be wondering when things will get better for you. We show you how to keep tabs.
  8. Investing Basics

    Why Interest Rates Affect Everyone

    Learn why interest rates are one of the most important economic variables and how every individual and business is affected by rate changes.
  9. Economics

    What is Deadweight Loss?

    Deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  10. Active Trading Fundamentals

    Why Rational Ignorance About Your Investments Might Really Be OK

    It's impossible to know everything about the markets. Find out how ignorance affects your investments.
  1. Where is the cost of living lowest in the U.S?

    Although the United States doesn't find itself on the top 10 list of Business Insider's "The Cheapest Places To Live," there ... Read Full Answer >>
  2. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  5. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  6. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center