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.

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