MBA: Mortgage Application Payments Decreased 0.8% to $2,041 in September
Homebuyer affordability improved in September, with the national median payment applied for by purchase applicants decreasing to $2,041 from $2,057 in August. 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 fifth consecutive month, as mortgage rates near the low 6 percent range improved purchasing power for prospective buyers,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “Overall affordability is now at its highest level since August 2022, but the recent jump in rates will likely cause conditions to plateau. MBA is forecasting for rates to be around 6.3 by the end of the year.”
The national PAPI index indicates that new home affordability improved in September. Interest rates decreased by 31 bps from August. This is the fifth consecutive decline in rates, down 100 bps from April. The median purchase application amount increased from $320,100 to $328,000. Taken together, we had a decrease in PAPI. It is at the lowest level since August 2022. The decrease in PAPI was felt in all but ten states.
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 0.8 percent to 157.9 in September from 159.2 in August. Median earnings were up 4.2 percent compared to one year ago, and while payments decreased 5.3 percent, the moderate earnings growth means that the PAPI is down 9.1 percent on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,369 in September from $1,388 in August.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,333 in September from $2,362 in August.
Additional Key Findings of MBA’s Purchase Applications Payment Index (PAPI) – September 2024
The national median mortgage payment was $2,041 in September – down $16 from August. It is down by $114 from one year ago, equal to a 5.3% decrease.
The national median mortgage payment for FHA loan applicants was $1,753 in September, down from $1,817 in August and down from $1,920 in September 2023.
The national median mortgage payment for conventional loan applicants was $2,053, down from $2,056 in August and down from $2,180 in September 2023.
The top five states with the highest PAPI were: Idaho (238.4), Nevada (236.7), Arizona (210.3), Florida (202.5), and Rhode Island (197.5).
The top five states with the lowest PAPI were: Louisiana (109.6), Connecticut (115.7), New York (119.0), West Virginia (121.0), and Alaska (124.8).
Homebuyer affordability increased for Black households, with the national PAPI decreasing from 159.2 in August to 157.9 in September.
Homebuyer affordability increased for Hispanic households, with the national PAPI decreasing from 151.2 in August to 150.1 in September.
Homebuyer affordability increased for White households, with the national PAPI decreasing from 161.5 in August to 160.2 in September.
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 September 2024 data. For additional information on MBA’s Purchase Applications Payment Index, click here.
