Homebuyer affordability was mostly unchanged in May, with the national median payment applied for by applicants up slightly to $1,897 from $1,889 in April. 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).
“The ongoing affordability hit of higher home prices and fast-rising mortgage rates led to a slowdown in purchase applications in May. While the median principal and interest payment only increased $8 from April, a typical borrower is paying $514 more through the first five months of 2022 – a jump of 37.1%,” says Edward Seiler, MBA’s associate vice president of housing economics, and executive director of Research Institute for Housing America. “Inflationary pressures and rates above 5 percent are both headwinds for the housing market in the coming months. MBA’s new forecast anticipates that sales of new and existing homes will fall below 2021 levels.”
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 increased 0.4% to 163.4 in May from 162.8 in April, meaning payments on new mortgages take up a larger share of a typical person’s income. Compared to May 2021 (120.6), the index jumped 35.5%. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased 0.36% to $1,241 from $1,236 in April.
The national median mortgage payment was $1,897 in May, up from $1,889 in April and $1,736 in March. Payments have increased $513 (37.1%) in the first five months of the year. For FHA loan applicants, it was $1,430 in May, up from $1,374 in April and $1,005 in May 2021. For conventional loan applicants, it was $1,960, down from $1,967 in April but up from $1,394 in May 2021.
The top five states with the highest PAPI were Idaho (253.0), Nevada (249.7), Arizona (233.5), Utah (210.9) and California (206.9). The top five states with the lowest PAPI were Washington, D.C. (99.7), Alaska (102.6), Connecticut (111.2), West Virginia (113.0) and Oklahoma (118.5).
Homebuyer affordability decreased slightly for Black households, with the national PAPI increasing from 165.9 in April to 166.6 in May. Homebuyer affordability decreased slightly for Hispanic households, with the national PAPI increasing from 155.8 in April to 156.4 in May. Homebuyer affordability decreased slightly for White households, with the national PAPI increasing from 163.6 in April to 164.3 in May.