This statistic can be a little obtuse, so a quick word on what the affordability index is telling us: an index value of 241 means that the median family income in the Twin Cities is 241% of what it would take to purchase a median-priced home (about $140K right now) based on prevailing interest rates, assuming 20% down payment, and a resulting house payment that consumes no more than 25% of the family’s gross monthly income.
Got that? In English: It’s designed to measure whether a typical family could qualify for a mortgage purchase a typical home.
Now, like any statistic, it is imperfect, and subject to some distortion based on current conditions. For example: 20% down payments are not the norm. 25% of income devoted to housing is below average for most with mortgages. The Median Sales Price is depressed at $140,000 due to the high number of low-priced/distressed sales, and few would argue that your average $140,000 property is a true representation of a “typical” family home in Minneapolis.
So just as everyone (no matter the income) tends to find their own level of poverty, everyone has to determine for themselves what is affordable
Bottom line: For most Twin Cities residents, homes are more affordable now than they have been in a very long time, but with rates on the rise, that purchasing power is already being eroded.