The national median monthly mortgage payment applied for by purchase applicants increased to $2,211 in May, up from $2,186 in April, according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI), which measures homebuyer affordability.
That brought the index score to 164.9 in May, up from 163.0 in April.
An increase in the index score is indicative of declining borrower affordability conditions. It 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 is indicative of improving borrower affordability conditions and occurs when loan application amounts decrease, mortgage rates decrease, or earnings increase.
Median earnings were up 5.8% in May compared with one year ago, and while payments decreased 0.4%, the significant earnings growth means that the PAPI is down (affordability is higher) 5.8% on an annual basis, the MBA says.
For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,512 in May from $1,497 in April.
“Homebuyer affordability declined in May as mortgage rates near 7 percent continued to put upward pressure on prospective homebuyers’ budgets,” says Edward Seiler, associate vice president, housing economics, for the MBA, and executive director, Research Institute for Housing America, in a statement. “Despite current affordability constraints, many homebuyers are still eager to enter the housing market. Rising inventory levels and moderating home-price growth have both been bright spots during this year’s spring homebuying season.”
Photo: Blake Wheeler