Housing Affordability In Jacksonville Florida

Housing Affordability Index for Jacksonville Florida July 2018

As a REALTOR when speaking to people I am often asked “how is the market”, or “are prices going up or down”.  The last few years my answer has been the market is doing very well and prices are on the rise.  While this is still true today I’ve begun hearing concerns about affordability.  Let’s take a closer look at housing affordability here in Jacksonville Florida to see if affordability is a cause for concern.

Housing affordability is a critical factor to consider when trying to forecast the direction of home prices as well as the overall health of the real estate market.  While there are other factors that influence home prices like supply and demand, population growth, unemployment rate, etc. if home prices exceed a home buyer’s ability to purchase them then those other issues become far less important.

OK, so how do we measure housing affordability in Jacksonville Florida?   Well, that’s where the Housing Affordability Index comes in.  The National Association of Realtors created the Housing Affordability Index or HAI in order to gauge affordability.  The HAI is used to measure whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home.  The formula used to calculate the HAI is:

HAI = ( Median Family Income / Qualifying Income ) * 100.

To interpret the index, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home.   An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home.  For example, an HAI of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home.  So how are things looking in Jacksonville you ask?

First, we need the data components used to calculate the Housing Affordability Index.  The things we need are:

Median Family Income currently $58,318, median home price currently 239,945.  The effective interest rate on a conventional 30 year fixed rate mortgage which is currently 4.375%.

The Qualifying income is derived from the monthly payment on the median-priced existing home, at the effective mortgage interest rate. The HAI assumes borrowers make a 20 percent down payment and that the maximum mortgage payment is 25 percent of gross monthly income for the household.  The formula used to calculate qualifying income is:

Monthly Principal & Interest Payment*4*12

Using the data for Jacksonville the qualifying income is $45,984.

$958*4*12 = $45,984

Using the HAI formula results in a value of 126.8

(58,318/45,984)*100 = 126.8

This is good news for the Jacksonville Real Estate Market.  The Housing Affordability Index shows that a family earning the median income in Jacksonville earns 126.8 percent of the income necessary to qualify for a conventional loan covering 80 percent of the price of the median-priced home.

Rising interest rates and home values reduce affordability.  If you are considering investing in your own home then waiting much longer may keep you from realizing your dream.  Call (904) 994-0493 for a no obligation counseling session where we will review your options and develop a plan for making your dream of owning your own home a reality for you and your family.  Meanwhile,  you may download a free homebuyers guide created to help prepare you for the home buying process.  Knowledge is power.