MBA: National Median Mortgage Payment Decreases for Third Consecutive Month

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Homebuyer affordability improved for the third straight month in August, with the national median payment applied for by applicants decreasing to $1,839 from $1,844 in July. This is according to the Mortgage Bankers Association‘s (MBA) Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey (WAS).

“Most of the country saw modest improvements in homebuyer affordability for the third straight month because of slightly lower mortgage rates amidst steady income gain growth. The healthy labor market continues to be a positive for the housing market, despite ongoing economic uncertainty and high inflation,” says Edward Seiler, MBA’s associate vice president of housing economics, and executive director of the Research Institute for Housing America. “Higher mortgage rates have reduced borrowers’ purchasing power since the start of the year. The median loan amount in August was $313,500, down from a peak of $340,000 in February.

“The recent stretch of modest affordability improvement likely hit a speedbump this month, as mortgage rates have jumped to around 6 percent,” adds Seiler. 

An increase in MBA’s 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 increase.

The national PAPI (Figure 1) decreased 0.3% to 157.9 in August from 158.3 in July, meaning payments on new mortgages take up a smaller share of a typical person’s income. Compared to August 2021 (115.7), the index has jumped 36.5%. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment between July and August 2022 was unchanged at $1,210.

The national median mortgage payment was $1,839 in August, down from $1,844 in July and $1,893 in June. Monthly payments are still up by $456 in the first eight months of the year – equal to a 33.0% increase.

Out of 50 states (and Washington, D.C.), 32 had lower PAPI values in August than in July. This includes six of the top 10 states with the highest PAPI values.

The national median mortgage payment for FHA loan applicants was $1,469 in August, up from $1,461 in July, and up from $1,009 in August 2021. The national median mortgage payment for conventional loan applicants was $1,901, up from $1,892 in July, and up from $1,350 in August 2021.

The top five states with the highest PAPI were Idaho (257.5), Nevada (249.4), Arizona (224.2), Utah (213.3) and California (202.4). The top five states with the lowest PAPI were Washington, D.C. (101.0); Alaska (108.2); Connecticut (108.9); Louisiana (110.5); and Oklahoma (120.1).

Homebuyer affordability increased slightly for Black households, with the national PAPI decreasing from 153.7 in July to 153.3 in August. Homebuyer affordability increased slightly for Hispanic households, with the national PAPI decreasing from 149.6 in July to 149.2 in August. Homebuyer affordability increased slightly for White households, with the national PAPI decreasing from 159.1 in July to 158.7 in August.

Image: Roger Starnes Sr on Unsplash

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