One measure that experts use to gauge housing affordability is known as the “Median Multiple,” which is the annual pre-tax median house price divided by the median household income. Generally speaking, in the decades following the Second World War, a ratio below 3.0 has been considered to be the benchmark of affordability. Therefore, it may come as welcome news that this ratio recently registered a 2.6 after having reached higher than 5.0 during the recent housing bubble. This is one of a number of statistics that should convince prospective buyers that homes are just about as affordable as they are going to get. At this time, many think that the upside potential now significantly outweighs any further downside risk.
HINT: Another measure of housing affordability, the percentage of monthly family income it takes to make mortgage payments (principal and interest, based on a mortgage rate of 4.1%), was recently at its lowest level (12%) since 1971.
