Mortgage Application Payments Decreased 1.6% in May to $2,219: MBA
(Illustration courtesy of MBA)
Homebuyer affordability improved in May, with the national median payment applied for by purchase applicants decreasing to $2,219 from $2,256 in April. This is according to the Mortgage Bankers Association’s Purchase Applications Payment Index, which measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey.
“Homebuyer affordability conditions improved in May as slightly lower mortgage rates and an uptick in housing inventory slightly eased the recent rise in application payment amounts,” said Edward Seiler, MBA’s Associate Vice President of Housing Economics and Executive Director of the Research Institute for Housing America. “MBA is forecasting for mortgage rates to fall closer to 6.5 percent by the end of the year, which along with rising inventory levels and a subsequent slowdown in home-price growth, should help affordability.”
An increase in MBA’s PAPI – indicative of declining borrower affordability conditions – means that the mortgage payment-to-income ratio 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 1.6% to 173.9 in May from 176.8 in April. Median earnings were up 4.6% compared to one year ago, and while payments increased 2.5 percent, the strong earnings growth means that the PAPI is down 2.0% on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,508 in May from $1,537 in April.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,522 in May from $2,604 in April.
Additional Key Findings of MBA’s Purchase Applications Payment Index (PAPI) – May 2024
The national median mortgage payment was $2,219 in May—down $37 from April. It is up by $55 from one year ago, equal to a 2.5% increase.
The national median mortgage payment for FHA loan applicants was $1,924 in May, down from $1,955 in April and up from $1,802 in May 2023.
The national median mortgage payment for conventional loan applicants was $2,226, down from $2,271 in April and up from $2,202 in May 2023.
The top five states with the highest PAPI were: Idaho (262.9), Nevada (258.3), Arizona (231.4), Florida (221.8), and Rhode Island (220.2).
The top five states with the lowest PAPI were: Louisiana (127.4), Connecticut (131.4), New York (132.2), Alaska (136.8), and West Virginia (139.3).
Homebuyer affordability increased for Black households, with the national PAPI decreasing from 183.1 in April to 180.1 in May.
Homebuyer affordability increased for Hispanic households, with the national PAPI decreasing from 168.9 in April to 166.1 in May.
Homebuyer affordability increased for White households, with the national PAPI decreasing from 179.4 in April to 176.5 in May.
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 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 data to calculate mortgage payments.
PAPI uses usual weekly earnings data from the U.S. Bureau of Labor Statistics’ Current Population Survey. 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 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 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 comes from the U.S. Census Bureau’s Housing Vacancies and Homeownership 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 May 2024 data.
Click here for additional information on MBA’s Purchase Applications Payment Index.
