The purpose of this information is to provide a historical overview of the top-five underpriced cities and the top-five overpriced cities in the Adkins 60-City Home Price Index.
The Justified Mortgage Loan Interest Rate represents the cost of debt for a 30-year fully-amortized fixed-rate mortgage loan that equates the median home price level for a city with the median household income level for the city. This factor is based upon the assumption that 28% of household income is the largest amount of money that should be spent in order to repay the principal and interest costs for a 30-year fully-amortized fixed-rate mortgage loan.
The Justified Percentage of Household Income represents the percentage of pre-tax household income that would have to be spent by the people that live in a city in order to justify the relationship between the median household income level for the city and the median home price level for the city. This factor is based upon on the month-ending national average mortgage loan interest rate for a 30-year fully-amortized fixed-rate mortgage loan.
For more information, please watch our catalog of historical Quarterly Residential Housing Market Review movie presentations.