WASHINGTON, D.C. (September 26, 2024) – RealEstateRama – Homebuyer affordability improved in August, with the national median payment applied for by purchase applicants decreasing to $2,057 from $2,140 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).
“Homebuyer affordability conditions improved for the fourth consecutive month, with lower mortgage rates, rising incomes, and slower home-price growth giving prospective buyers’ budgets a much-needed boost,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “MBA expects that lower mortgage rates, coupled with increasing housing inventory, will entice additional homebuyers to enter the housing market.”
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 3.9 percent to 160.7 in August from 167.2 in July. Median earnings were up 3.2 percent compared to one year ago, and while payments decreased 5.2 percent, the moderate earnings growth means that the PAPI is down 8.2 percent on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,388 in August from $1,444 in July.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,362 in August from $2,452 in July.
Additional Key Findings of MBA’s Purchase Applications Payment Index (PAPI) – August 2024
- The national median mortgage payment was $2,057 in August —down $83 from July. It is down by $113 from one year ago, equal to a 5.2% decrease.
- The national median mortgage payment for FHA loan applicants was $1,817 in August, down from $1,838 in July and down from $1,909 in August 2023.
- The national median mortgage payment for conventional loan applicants was $2,056, down from $2,140 in July and down from $2,187 in August 2023.
- The top five states with the highest PAPI were: Idaho (252.1), Nevada (247.3), Arizona (217.1), Florida (204.6), and Utah (202.9).
- The top five states with the lowest PAPI were: Louisiana (115.3), Connecticut (118.0), New York (120.8), D.C. (121.1), and Alaska (122.3).
- Homebuyer affordability increased for Black households, with the national PAPI decreasing from 167.7 in July to 161.2 in August.
- Homebuyer affordability increased for Hispanic households, with the national PAPI decreasing from 156.0 in July to 150.0 in August.
- Homebuyer affordability increased for White households, with the national PAPI decreasing from 168.8 in July to 162.3 in August.
About MBA’s Purchase Applications Payment Index
The Mortgage Bankers Association’s Purchase Applications Payment Index (PAPI) measures how new mortgage payments vary across time relative to income. Higher index values indicate that the mortgage payment to income ratio (PIR) is higher than in a month where the index is lower. Contrary to other affordability indexes that make multiple assumptions about mortgage underwriting criteria to estimate mortgage payment level, PAPI directly uses MBA’s Weekly Applications Survey (WAS) data to calculate mortgage payments.
PAPI uses usual weekly earnings data from the U.S. Bureau of Labor Statistics’ Current Population Survey (CPS). Usual weekly earnings represent full-time wage and salary earnings before taxes and other deductions and include any overtime pay, commissions, or tips usually received. Note that data are not seasonally adjusted.
MBA’s Builders’ Purchase Application Payment Index (BPAPI) uses MBA’s Builder Application Survey (BAS) data to create an index that measures how new mortgage payments vary across time relative to income, with a focus exclusively on newly built single-family homes. As with PAPI, higher index values indicate that the mortgage payment to income ratio (PIR) is higher than in a month where the index is lower. To create BPAPI, principal and interest payment amounts are deflated by the same earnings series as in PAPI.
The rent data series calculated for MBA’s national mortgage payment to rent ratio (MPRR) comes from the U.S. Census Bureau’s Housing Vacancies and Homeownership (HVS) survey’s median asking rent. The HVS data is quarterly, and as such, the mortgage payment to rent ratio will be updated quarterly. The HVS data is quarterly, and as such, the mortgage payment to rent ratio will be updated quarterly. MPRR data was not included in August 2024 data.
For additional information on MBA’s Purchase Applications Payment Index, click here.
Contact
Falen Taylor
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