Homebuyer affordability improved in May, with the national median payment applied for by purchase applicants decreasing to $2,219, down from $2,256 in April, according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI).
That’s a decrease of 1.6% – to an index score of 173.9.
Median earnings were up 4.6% compared to one year ago, and while payments increased 2.5%, the strong earnings growth means that the PAPI is down 2.0% on an annual basis.
For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,508 in May, down from $1,537 in April.
“Homebuyer affordability conditions improved in May as slightly lower mortgage rates and an uptick in housing inventory slightly eased the recent rise in application payment amounts,” says Edward Seiler, associate vice president, housing economics, and executive director, Research Institute for Housing America, in a statement. “MBA is forecasting for mortgage rates to fall closer to 6.5 percent by the end of the year, which along with rising inventory levels and a subsequent slowdown in home-price growth, should help affordability.”
The index 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 index score is indicative of declining borrower affordability conditions while a decrease is indicative of improving borrower affordability conditions.
Using only new home purchase application data, the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,522 in May, down from $2,604 in April.
Photo: Blake Wheeler