Housing Affordability

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Housing Affordability (2020)

In 2020, 70.0% of homes sold in the Tucson Metropolitan Statistical Area (MSA) were affordable to a family earning the local median income. This was a slight decrease from 2019. Tucson ranked first among peer metropolitan areas in housing affordability, just ahead of Albuquerque. Only 59.2% of homes in the U.S. were affordable to families earning the median income for the nation, while the share of affordable homes in Portland was below 50%. San Diego’s share of affordable homes was so low, at 19.4%, it was off the chart! Denver and San Diego were the only MSAs that we track that reported an increase in the percent of affordable homes in 2020. The median home price in many MSAs across the West has risen at a faster pace than wages, thus decreasing affordability. Historically the share of affordable homes in Tucson has fluctuated. However, since 2009 it has remained higher than the national share.

Why is it important?

Housing affordability is an important issue for many households. Access to affordable housing is important because the home is the largest asset for most people, and its price can affect spending in other areas such as: childcare, education, health care, and leisure activities. Since personal consumption makes up the better part of the economy, and discretionary income levels are influenced by the cost of housing, home prices are an important factor in the local economy. Several factors can influence home prices, including mortgage rates, demographics, income growth, the supply of new housing, and speculative trends. Housing affordability is determined by the share of homes sold in an area that would have been affordable to a family earning the local median income. Housing affordability data comes from the National Association of Home Builders (NAHB).

What are the key trends?

The share of homes sold in Tucson during 2020 that were affordable to a family earning the median income was 70.0%. This was 10.8 percentage points higher than the share of affordable homes in the U.S. Likewise, Phoenix had a slightly higher share of affordable homes than the U.S. at 62.4%. Tucson’s share of affordable homes has fluctuated significantly during the past eighteen years with a low in 2006, just before the housing boom, and a high of 87.7% in 2012. Since 2012, housing affordability has declined as home prices rose faster than wages.  In 2019 and 2020, wages in Tucson increased at the fastest rates since the Great Recession which in turn improved housing affordability in 2019. However, during the COVID-19 pandemic home prices have continued to increase while wages and employment have declined. Note the change in methodology in how housing affordability measures are calculated starting in 2012, full details on the change can be found in the "How is it Measured Section" below.

How is it measured?

Housing affordability data comes from the National Association of Home Builders (NAHB). The index is calculated for a given area based on two major components: income and housing. NAHB’s methodology includes using annual median family income estimates and assumes that a family can afford to spend 28% of its gross income on housing. Additionally, monthly sales transaction records are used to determine the sales price of sold homes. Further, NAHB calculates the monthly principal, interest, and taxes based on a 30 year fixed rate mortgage with a loan for 90% of the sales price. The data is reported quarterly and the Making Action Possible (MAP) research team aggregates the data to an annual index value.

In the spring of 2019, the FHFA interest rate series used to calculate the Housing Opportunity Index (Housing Affordability Rate) was discontinued. Beginning in the second quarter of 2019, the Housing Opportunity Index had to be calculated using a new interest rate series from Freddie Mac. The two interest rate series are conceptually different. To preserve comparability, NAHB revised the Housing Opportunity Index back to 2012 using the new Freddie Mac interest rate series. Trend data presented above can be compared between 2000 - 2011 and 2012 - present.