Happy Spring, folks! Things over here at the Goldfinch Factory are getting busy. The market is certainly taking its upward turn, warming up with the temperatures. I know a lot of people are curious about what this year will bring for the real estate market, and we’ve been consistently working in a sellers’ market for years now, but what does that really mean for buyers and their outlook on finding their dream homes?
We know the market has been challenging at times for potential homeowners, but year over year sales and transactions in real estate have climbed steadily, meaning more and more homes are being sold each year.
Obviously, buyers are finding homes that they can afford. Right? Perhaps. Real estate trends have been positive, for sure, but not everyone is realizing their dream of owning their own home.
One of the best ways to know how the prices in the market compare to the price ranges of potential buyers is the Housing Affordability Index. This is a tool that helps real estate professionals understand the overall health of the housing market as it pertains to buyers or potential homeowners.
The housing affordability index calculates the median household income, median home prices and current mortgage rates on 30-year loans. To put it plainly, it helps determine whether an average family can afford an average house.
This index is important because it helps parse out the many variables involved with buying homes. We all read the headlines about soaring home prices and competitive markets, but real estate, like most commodities, is more complex than what one can gather from a short headline.
As household incomes rise and interest rates fluctuate, affordability changes too. A tool like the Housing Affordability Index helps to make sense of all the different economical factors and changes from year to year and place to place.
Scores on the index above 100 indicate that average families can afford the average house. Scores below 100 indicate that the market is priced too high and that average families cannot afford to buy an average home where they live.
These indexes can be done on larger and smaller scales. For example, one can calculate the national housing affordability index, or one can find the affordability of homes in a given county or region.
This is important to understand because real estate is very regionalized, and the pricing and affordability in areas can vary greatly from one place to the next and from the national average.
For example, according to the National Association of Realtors, the national index climbed to 117 in February. Compare that to the northeast, which had an index of 105 and the west, which had an index of 84.5!
Home prices in the west have soared far beyond the average income for that area, making for a very difficult market for most potential homebuyers. And even though home prices are up in the northeast too, they’ve remained well within the income range for the area.
As you can imagine, there are many different factors that affect the affordability index, including interest rates, the job market and overall economy, and local real estate market trends.
For example, if demand for homes in a given area goes up, prices will too – sometimes high enough that most potential homeowners can no longer afford to buy them (likely what we’re seeing out west). Likewise, if interest rates drop, potential buyers can afford to pay more, helping to balance the affordability index.
How has the housing affordability index fared over the last few years? Well, at least on the national level, the index has eased nicely, climbing from 96.9 in 2023 to 102.5 in 2025, signaling an overall positive trend for the market, at least from a wider lens.
As we saw from the regional comparisons, housing affordability hasn’t been the best for everyone, and Maine is no exception. Out-of-state buyers driving up overall home prices has hurt the state’s affordability index, which in 2025 was 73, according to Maine’s State Housing Authority.
Maine’s housing affordability index has been out of balance since the start of the pandemic, though the trends have been more positive over the last few years. The last time the state’s index was above 100 was in 2020, just as the pandemic started.
Since then the state’s housing has remained unaffordable to most Mainers, reaching as low as 64 in 2024.
This probably isn’t much of a surprise to anyone who’s tried to buy a home in Maine over the last several years, but it’s important to note that the index helps assess the market. It’s an important tool, but it’s not perfect. Most buyers entering the market still end up buying a home in Maine, even as the affordability index leans well below 100.
The housing affordability index isn’t perfect but helps quantify that sense of difficulty and is a great indication of just how obtainable homeownership is in any given area. It’s helpful to distill the rhetoric and opinions on the news and social media to have a clearer picture of what’s going on in the market.
If you have any questions about real estate or the housing affordability index, feel free to reach out to me today.
