What does it mean when the index is in the affordable or unaffordable zone?
We use the widely-recognized (albeit imperfect) 30% affordability standard a benchmark. This standard suggests that housing is considered affordable when it costs no more than 30% of a household’s income. In our case, we apply that to wages, not household income, to better reflect the purchasing power of a typical worker.
So, in our index the target zone threshold signals when the cost of housing exceeds what the average wage can reasonably support. When the index is in the target zone, it means that, based on current wages and housing costs, a typical full-time worker would spend less than 30% of their income on housing. When the index drops below the target zone, it signals that housing costs are eating up more than 30% of that worker’s income—making it harder to sustain housing without financial strain.
If the index is in the affordable zone, does that mean housing is affordable for everyone?
No. The index reflects big-picture changes in market affordability—not individual circumstances. Not everyone earns the average wage, and not everyone is looking for housing priced in this segment of the market. People with lower incomes, part-time jobs, or unstable employment may still find housing unaffordable, even when the index value is above zero. Likewise, some may access affordable housing options, such as subsidized units or informal discounts from family or friends arrangements; such options are excluded from the market housing measures we use. Instead, our index offers a clear view of how general housing market conditions affect the typical worker.
Why does the index use wages instead of household income?
Household income includes more than just what people earn from their main job—it can include retirement income, dividends, public assistance, or money from multiple earners in the same household. While useful in some contexts, household income can blur the picture when we’re trying to understand whether typical jobs in our community can support the cost of housing. Additionally, people often respond to rising costs by taking on second jobs or extra hours just to stay afloat. While that increased income may look good on paper, it reflects economic pressure rather than genuine affordability. By using wage data, we focus on what the labor market is actually offering individual workers. This gives us a clearer view of affordability grounded in job-based earnings.
What should policymakers or community groups do with this information?
This index is a tool to help ground local decisions in real-world data. If the index shows that entry-level homes are outpacing wages, it signals a need for action—whether that’s increasing housing supply, boosting wages, preserving affordable housing, or expanding tenant and worker protections. For community groups, the index can support advocacy, help focus efforts on the biggest gaps, and provide a shared language for discussing trends in the housing market. It’s not just a number—it’s a starting point for conversations and solutions rooted in local reality.
How do you determine the cost of a “typical” entry-level home?
The Zillow Home Value Index (ZHVI) provides a comprehensive view of home values by estimating the typical value of homes across various market segments, not just those recently sold. We specifically use the Bottom Tier version of the ZHVI, which focuses on homes valued in the bottom third of a given market. This segment serves as a proxy for “entry-level” homes. By concentrating on this tier, our index provides insights into the accessibility of homeownership for new buyers, who tend to shop within the bottom third of the market.
