pricetoincome

Price-to-income, or the price-to-income ratio, is a metric used in housing economics to assess affordability by comparing typical housing prices with typical household incomes. The common formulation is price-to-income = median house price / median annual gross household income. Analysts may compute the ratio at different geographic levels (national, regional, city) and use medians or means depending on data availability.

Interpretation and uses: a lower ratio suggests greater affordability, while a higher ratio indicates that housing costs consume a larger share of income relative to house prices. The metric helps compare markets, track affordability over time, and assess policy impacts or credit conditions. It can be computed in nominal terms or adjusted for inflation to reflect real affordability.

Variants and data: calculations typically rely on data from national statistics offices, housing agencies, or central banks, combining median or average house prices with median or average incomes. Because data sources, geographic boundaries, and methods differ, cross-country or cross-city comparisons should consider methodological differences and time periods.

Limitations and caveats: the ratio does not account for mortgage interest rates, down payments, debt servicing, credit availability, or changing lending standards. It ignores rental affordability and wealth distribution, and medians may conceal substantial variation within regions. Data quality, reporting lags, and price or income measurement can influence the result, so the ratio is best used alongside other indicators of housing affordability and financial vulnerability.

Related metrics include the price-to-rent ratio and broader housing affordability indices, which may incorporate mortgage payments, taxes, and maintenance costs.