Homebuyer affordability improved slightly in December, as shown by the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI).
The index measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey.
The report shows that the national median payment applied for by purchase applicants decreased to $2,127 in December, down from $2,133 in November.
That brought the index score to 160.8, down from 161.3 in November.
An increase in the index score 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 – indicative of improving borrower affordability conditions – occurs when loan application amounts decrease, mortgage rates decrease, or earnings increase.
The index includes a subindex that looks only at new home purchases. As per the Builders’ Purchase Application Payment Index (BPAPI), the median mortgage payment for purchase mortgages for new home purchases increased to $2,500 in December, up from $2,481 in in November.
“Homebuyer affordability conditions were essentially flat in December, the result of somewhat volatile mortgage rate movements and moderating home-price growth,” says Edward Seiler, associate vice president, housing economics, and executive director, Research Institute for Housing America, in a statement. “2024 was a sluggish year for home sales because of weak affordability conditions throughout the country. MBA expects 2025 conditions will improve as housing supply increases, giving prospective buyers more options and putting less pressure on their budgets.”
Photo: Gustavo Zambelli