Weaknesses of Housing Affordability Indices Used by Practitioners

Housing affordability is a prominent concern in the United States for multiple reasons. Since around 2007, there has been a decline in house prices, and in some parts of the country, a significant depreciation has occurred. There has also been a continued emphasis placed on becoming a homeowner by the United States government with multiple programs being established to help low-income households obtain homeownership (Schwartz, 2006).

Qualifying guidelines for mortgages became more lenient for a time, contributing to the mortgage crisis. In addition, lenders approved borrowers regardless of the borrowers’ ability to pay the loan, and many of those loans were loaded with predatory features (Rushton, 2007). At the same time, the nation as a whole experienced a negative savings rate (Bureau of Economic Analysis, 2008) and increased levels of debt—a notorious combination that caused concerns for housing instability.

Also Read: Middle-Income Housing Affordability Crisis in Canada