Homebuyer affordability decreased in August, as the national median payment applied for by purchase applicants increased to $2,170, up from $2,162 in July, according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI).
“Prospective homebuyers’ budgets continue to be impacted by the combination of high home prices and mortgage rates that remain higher than 7 percent,“ says Edward Seiler, MBA’s associate vice president, housing economics, and executive director, Research Institute for Housing America, in a statement. “If mortgage rates shift lower in 2024, as we anticipate, the combination of rising inventory levels and lower rates should lead to stronger demand for buying a home.”
The national PAPI increased 0.4%, to an index score of 175.4, in August, up from a score of 174.7 in July.
With this increase, the PAPI is now only two points lower than its record level in May 2023.
Median earnings were up 4.2% compared to one year ago, and while payments increased by 18.0%, the strong earnings growth means that the PAPI is up 13.2% on an annual basis.
For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,444 in August, down from $1,451 in July.
The PAPI measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey (WAS).
An increase in the PAPI – indicative of declining borrower affordability conditions – means that the mortgage payment to income ratio (PIR) is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings. A decrease in the PAPI – indicative of improving borrower affordability conditions – occurs when loan application amounts decrease, mortgage rates decrease, or earnings inc
Looking at new home purchases, the MBA’s Builders’ Purchase Application Payment Index shows that the median mortgage payment for new home purchases in August increased to $2,609, up from $2,526 in July.
Photo: Pepi Stojanovski