<h3>
</h3><p style="margin-bottom: 0cm;"><a href="http://www.noss123.com/">http://www.noss123.com/</a></p><span class="mw-headline"></span><h3> <br></h3><h3><span class="mw-headline">Housing affordability measures</span></h3>
<ul><li>The <i>price to income ratio</i> is the basic affordability measure for housing in a given area. It is generally the ratio of median house prices to median familial disposable incomes, expressed as a percentage or as years of income. It is sometimes compiled separately for first time buyers and termed
<i>attainability</i>.
This ratio, applied to individuals, is a basic component of mortgage
lending decisions. According to a back-of-the-envelope calculation by Goldman Sachs
economists, a comparison of median home prices to median household
income suggests that U.S. housing in 2005 is overvalued by 10%.
"However, this estimate is based on an average mortgage rate of about
6%, and we expect rates to rise," the firm's economics team wrote in a <span class="external text">recent report</span>.
According to Goldman's figures, a one-percentage-point rise in mortgage
rates would reduce the fair value of home prices by 8%.</li><li>The <i>deposit to income ratio</i> is the minimum required downpayment for a typical mortgage <sup class="noprint Inline-Template"><span title="The text preceeding this tag needs specification since March 2007" style="white-space: nowrap;">
[<i>specify</i>]</span></sup>, expressed in months or years of income. It is especially important for first-time buyers without existing home equity; if the downpayment becomes too high then those buyers may find themselves "priced out" of the market. For example, as of 2004 this ratio was equal to one year of income in the UK (Nottingham Trent University
<span class="external text">paper</span>).<br>
Another variant is what the National Association of Realtors calls the "housing affordability index" in its publications. <span class="external autonumber">[6]</span>. (The NAR's methodology was criticized by some analysts as it does not account for inflation
<span class="external autonumber">[7]</span>.
Other analysts, however, consider the measure appropriate, because both
the income and housing cost data is expressed in terms that include
inflation and, all things being equal, the index implicitly includes
inflation<sup class="noprint Template-Fact"><span title="This claim needs references to reliable sources since February 2007" style="white-space: nowrap;">[<i>citation needed</i>]</span></sup>).
In either case, the usefulness of this ratio in identifying a bubble is
debatable; while downpayments normally increase with house valuations,
bank lending becomes increasingly lax during a bubble and mortgages are
offered to borrowers who would not normally qualify for them (see
Housing debt measures, below).</li><li>The <i>Affordability Index</i> measures the ratio of the actual
monthly cost of the mortgage to take-home income. It is used more in
the United Kingdom where nearly all mortgages are variable and pegged
to bank lending rates. It offers a much more realistic measure of the
ability of households to afford housing than the crude price to income
ratio. However it is more difficult to calculate, and hence the price
to income ratio is still more commonly used by pundits.</li><li>The <i>Median Multiple</i> measures the ratio of the median house
price to the median annual household income. This measure has
historically hovered around a value of 3.0 or less, but in recent years
has risen dramatically, especially in markets with severe public policy
constraints on land and development. The <span class="new">Demographia International Housing Affordability Survey</span> uses the Median Multiple in its 6-nation report.</li></ul>