function calculatePIR() {
// Get input values
var priceInput = document.getElementById('medianHomePrice');
var incomeInput = document.getElementById('annualHouseholdIncome');
var resultBox = document.getElementById('resultBox');
var resultValue = document.getElementById('pirResult');
var interpretationBox = document.getElementById('pirInterpretation');
var price = parseFloat(priceInput.value);
var income = parseFloat(incomeInput.value);
// Validation
if (isNaN(price) || isNaN(income) || price < 0 || income <= 0) {
alert("Please enter valid positive numbers for both fields. Income cannot be zero.");
return;
}
// Calculation
var pir = price / income;
// Display Result
resultValue.innerHTML = pir.toFixed(2);
resultBox.style.display = 'block';
// Interpretation Logic (Based on Demographia International Housing Affordability Survey)
var statusHtml = '';
var message = '';
if (pir <= 3.0) {
statusHtml = 'Affordable';
message = 'This ratio indicates the housing market is generally considered affordable relative to income.';
} else if (pir > 3.0 && pir <= 4.0) {
statusHtml = 'Moderately Unaffordable';
message = 'This ratio indicates the housing market is moderately unaffordable.';
} else if (pir > 4.0 && pir <= 5.0) {
statusHtml = 'Seriously Unaffordable';
message = 'This ratio indicates the housing market is seriously unaffordable.';
} else {
statusHtml = 'Severely Unaffordable';
message = 'This ratio indicates the housing market is severely unaffordable.';
}
interpretationBox.innerHTML = 'Status: ' + statusHtml + " + message;
}
What is the PIR Rate?
The Price to Income Ratio (PIR) is a fundamental economic metric used to assess housing affordability in a specific area, city, or country. It answers a simple yet critical question: how many years of gross annual income does it take for an average household to purchase an average-priced home?
By calculating the PIR rate, economists, real estate investors, and homebuyers can determine if a housing market is overvalued or if properties are reasonably priced relative to the earning power of the local population.
How to Calculate PIR Rate
The calculation for the Price to Income Ratio is straightforward. It compares the median home price in a specific area to the median annual gross household income in that same area.
PIR = Median Home Price / Median Annual Household Income
Example Calculation:
Median Home Price: $400,000
Annual Household Income: $80,000
Calculation: 400,000 รท 80,000 = 5.0
In this example, the PIR is 5.0, meaning it takes five years of total gross income to purchase a home.
Interpreting Your Results
The standard benchmarks for interpreting PIR come from the Demographia International Housing Affordability Survey. These categories help classify the health of a housing market:
3.0 & Under (Affordable): Housing prices are well-aligned with incomes. This is historically considered a healthy market.
3.1 to 4.0 (Moderately Unaffordable): Prices are beginning to outpace wage growth, creating some strain on buyers.
4.1 to 5.0 (Seriously Unaffordable): A significant gap exists between wages and property values. Homeownership may be difficult for first-time buyers.
5.1 & Over (Severely Unaffordable): This indicates a housing bubble or a highly restrictive market where housing costs have decoupled from local earnings.
Why Does the PIR Rate Matter?
Understanding the PIR rate is essential for multiple stakeholders:
Homebuyers: It helps determine if now is a good time to buy or if renting might be financially more prudent while saving.
Investors: A high PIR often signals low rental yields relative to the asset price, whereas a lower PIR might suggest better value for money.
Policymakers: Governments monitor PIR to adjust zoning laws, interest rates, and housing subsidies to prevent economic instability.
Limitations of the Metric
While the PIR calculator provides a quick snapshot of affordability, it does not account for interest rates, property taxes, or the availability of financing. A market with a high PIR might still be accessible if mortgage interest rates are historically low, reducing the monthly payment burden.