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Home Buyers Index: Detroit Region

The Home Buyers Index (HBI) measures the affordability of a home purchase. The index is benchmarked to 100, which signifies a household has exactly enough income to qualify for a mortgage on a median-priced home. An increase (decrease) in the HBI means that a house payment is more (less) affordable.

The HBIs for the metro Detroit cities and counties are above 100. There are considerable differences, however, across the cities (shown in the table and bar chart). Detroit and Pontiac have the most affordable housing markets, while Birmingham and Rochester are notably less affordable than other cities in the region. Since 2011 housing affordability has declined across all the cities (displayed in chart). The decline in home affordability is due to housing prices increasing substantially faster than median household income during the recovery from the recession.

A HBI chart for each city since January 2011, a table that has the change in the HBI since last month and from a year ago, and a bar chart that displays the HBI for each city in the latest month are displayed below. The HBI is updated monthly.

Choose a region:

About the HBI

The HBI is based on the methodology developed by the National Association of Realtors (NAR) for their Housing Affordability Index. Zillow data for a single family home is used for median home value by city. Median household income is estimated using annual data from the Census Bureau American Community Survey, monthly annualized wage data from the Bureau of Labor Statistics, and the ratio of annual wages to annual household income since 2010. Mortgage rates are from the Federal Reserve Economic Data (FRED). Following the NAR, the calculation assumes a down payment of 20 percent of the home price and it assumes a qualifying ratio of 25 percent. That means the monthly P&I payment cannot exceed 25 percent of the median family monthly income.

A value of 100 indicates that a household with the median income has exactly enough earnings to qualify for a mortgage on a median-priced home. An index above 100 signifies that a household earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. A HBI of 120 means a family earning the median family income has 120 percent of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home.

Timothy Hodge, PhD
Jonathan Silberman, PhD

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