Affordability Index

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. House Price Index - HPI

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

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

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

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

    A group of indexes that tracks changes in home prices throughout ...
  6. Benchmark

    A standard against which the performance of a security, mutual ...
RELATED FAQS
  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. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  3. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  4. How does neoclassical economics relate to neoliberalism?

    While it may be likely that many neoliberal thinkers endorse the use of (or even emphasize) neoclassical economics, the two ... Read Full Answer >>
  5. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... Read Full Answer >>
  6. How is abatement cost accounted for on financial statements?

    Abatement costs are accounted for on a company's financial statements through increases in either cost of goods sold or operational ... Read Full Answer >>
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. Economics

    Calculating Income Elasticity of Demand

    Income elasticity of demand is a measure of how consumer demand changes when income changes.
  9. Economics

    Understanding Implicit Costs

    An implicit cost is any cost associated with not taking a certain action.
  10. Economics

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!