MBA: Mortgage Application Payments Increase 4.2% to $2,127 in October
Homebuyer affordability declined in October, with the national median payment applied for by purchase applicants increasing to $2,127 from $2,041 in September. This is according to the Mortgage Bankers Association’s 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.
“Homebuyer affordability conditions declined notably in October as rapidly rising mortgage rates pushed the national median mortgage payment up $86 from September,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “With the increase in mortgage rates, the PAPI reached its highest level since July, and we expect weaker homebuyer affordability to remain a hurdle for prospective buyers in the final months of 2024.”
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 2.8% to 162.3 in October from 157.9 in September. Median earnings were up 3.2% compared to one year ago, and while payments decreased 3.3%, the moderate earnings growth means that the PAPI is down 6.3% on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,431 in October from $1,369 in September.
MBA’s national mortgage payment to rent ratio (MPRR) decreased from 1.46 at the end of the second quarter (June 2024) to 1.34 at the end of the second quarter (September 2024), meaning mortgage payments for home purchases have decreased relative to rents. The Census Bureau’s HVS national median asking rent in second-quarter 2024 increased to $1,523 ($1,481 in second-quarter 2024). The 25th percentile mortgage application payment to median asking rent ratio decreased to 0.90 in September (0.99 in June 2024).
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased to $2,470 in October from $2,333 in September.
Additional Key Findings of MBA’s Purchase Applications Payment Index (PAPI) – October 2024
The national median mortgage payment was $2,127 in October—up $86 from September. It is down by $72 from one year ago, equal to a 3.3% decrease.
The national median mortgage payment for FHA loan applicants was $1,842 in October, up from $1,753 in September and down from $1,955 in October 2023.
The national median mortgage payment for conventional loan applicants was $2,134, up from $2,053 in September and down from $2,208 in October 2023.
The top five states with the highest PAPI were: Idaho (241.9), Nevada (241.6), Arizona (217.2), Utah (205.1), and Rhode Island (205.0).
The top five states with the lowest PAPI were: Louisiana (114.8), Connecticut (115.1), Alaska (119.1), Vermont (119.6), and West Virginia (123.0).
Homebuyer affordability decreased for Black households, with the national PAPI increasing from 157.9 in September to 162.3 in October.
Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 150.1 in September to 154.2 in October.
Homebuyer affordability decreased for White households, with the national PAPI increasing from 160.2 in September to 164.7 in October.
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.
For additional information on MBA’s Purchase Applications Payment Index, click here.
