MBA: Mortgage Application Payments Decreased 2.4% to $2,167 in June
(Image courtesy of MBA; Breakout image courtesy of Mikhail Nilov/pexels.com)
Homebuyer affordability improved in June, with the national median payment applied for by purchase applicants decreasing to $2,167 from $2,219 in May. 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 second straight month as declining mortgage rates continue to increase purchasing power and is enticing some borrowers back into the housing market,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “The median loan application amount fell to $320,512 in June, indicating that home-price growth is moderating, which should boost additional activity.”
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 2.4% to 170.9 in June from 175.0 in May. Median earnings were up 3.9% compared to one year ago, and while payments increased 0.2%, the strong earnings growth means that the PAPI is down 3.6%on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,460 in June from $1,509 in May.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,510 in June from $2,522 in May.
Additional Key Findings of MBA’s Purchase Applications Payment Index (PAPI) – June 2024
• The national median mortgage payment was $2,167 in June—down $52 from May. It is up by $5 from one year ago, equal to a 0.2% increase.
• The national median mortgage payment for FHA loan applicants was $1,907 in June, down from $1,924 in May and up from $1,854 in June 2023.
• The national median mortgage payment for conventional loan applicants was $2,180, down from $2,226 in May and down from $2,205 in June 2023.
• The top five states with the highest PAPI were: Nevada (259.4), Idaho (253.4), Arizona (229.7), Rhode Island (224.1), and Utah (220.2).
• The top five states with the lowest PAPI were: Louisiana (122.9), West Virginia (124.2), New York (124.8), Alaska (125.4), and DC (127.0).
• Homebuyer affordability increased for Black households, with the national PAPI decreasing from 175.6 in May to 171.4 in June.
• Homebuyer affordability increased for Hispanic households, with the national PAPI decreasing from 163.3 in May to 159.5 in June.
• Homebuyer affordability increased for White households, with the national PAPI decreasing from 176.8 in May to 172.6 in June.
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. MPRR data was not included in June 2024 data.
For additional information on MBA’s Purchase Applications Payment Index, click here.
