WASHINGTON, D.C. – RealEstateRama – Homebuyer affordability declined in April, with the national median payment applied for by purchase applicants increasing to $2,256 from $2,201 in March. 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 declined further as mortgage rates remained above 7 percent in April, sidelining many prospective buyers from entering the housing market,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Execuive Director, Research Institute for Housing America. “In addition to lower mortgage rates, more housing inventory is desperately needed in markets throughout the country this summer to alleviate these tough affordability conditions.”
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) increased 1.5 percent to 176.8 in April from 174.2 in March. Median earnings were up 4.6 percent compared to one year ago, and while payments increased 6.8 percent, the strong earnings growth means that the PAPI is up 2.1 percent on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,537 in April from $1,488 in March.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased to $2,604 in April from $2,556 in March.
MBA’s national mortgage payment to rent ratio (MPRR) increased from 1.40 at the end of the fourth quarter (December 2023) to 1.50 at the end of the first quarter (March 2024), meaning mortgage payments for home purchases have increased relative to rents. The Census Bureau’s HVS national median asking rent in first-quarter 2024 increased slightly to $1,469 ($1,465 in fourth-quarter 2023). The 25th percentile mortgage application payment to median asking rent ratio increased to 1.01 in March (0.94 in December 2023).
Additional Key Findings of MBA’s Purchase Applications Payment Index (PAPI) – April 2024
- The national median mortgage payment was $2,256 in April—up $55 from March. It is up $144 from one year ago, equal to a 6.8% increase.
- The national median mortgage payment for FHA loan applicants was $1,955 in April, up from $1,898 in March and up from $1,750 in April 2023.
- The national median mortgage payment for conventional loan applicants was $2,271, up from $2,222 in March and up from $2,170 in April 2023.
- The top five states with the highest PAPI were: Idaho (267.2), Nevada (264.9), Arizona (236.4), Florida (227.4), and Rhode Island (224.8).
- The top five states with the lowest PAPI were: Alaska (131.6), Louisiana (134.1), Connecticut (134.2), New York (139.1), and Washington, D.C. (141.2).
- Homebuyer affordability decreased for Black households, with the national PAPI increasing from 180.4 in March to 183.1 in April.
- Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 166.4 in March to 168.9 in April.
- Homebuyer affordability decreased for White households, with the national PAPI increasing from 176.8 in March to 179.5 in April.
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.
For additional information on MBA’s Purchase Applications Payment Index, click here.
Contact
Falen Taylor
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