The MAR Maryland First Time Homebuyers Affordability Index (MDHAI) is a monthly indicator of the affordability of a starter home for a typical first time Maryland homebuyer.
An index of 100% means that this homebuyer, aged 25-44, has enough income to buy the typical starter home at current effective interest rates. An index less than 100% means that the homebuyer has less than the required income. The price of a starter home, determined by the National Association of REALTORS® survey results, is currently calculated at 85% of the median price of Maryland homes for the month. This calculation determines the price that first time buyers typically pay.
For example, in October 2003, the index level of 67.3% meant that in that month, the typical first time homebuyer had only about two-thirds of the income needed to buy.
The index fluctuates based upon changes in home prices, interest rates and income. When prices or interest rates rise, or income falls, affordability declines and the index drops. When prices or rates fall, or income rises, affordability increases and the index rises.
MAR has calculated the index back to 2000. In that time, the highest level was reached in 2001, when the index peaked at 80.1%. At that level, homebuyers still lacked 20% of the income needed to buy a starter home.
For more information about the calculation of the index, including loan terms, interest rate calculations and other information about the way the index is calculated, click here.