MBA affordability index points to rising costs, impacting buyer budgets
Homebuyers faced tougher conditions in January as the cost of getting a mortgage in the US continued to creep up, according to the Mortgage Bankers Association (MBA).
MBA’s Purchase Applications Payment Index (PAPI) revealed that the median mortgage payment homebuyers were applying for rose to $2,134, marking an increase from $2,055 the previous month.
Despite a 5.2% rise in median earnings over the past year and an 8.6% increase in mortgage payments, the PAPI went up by 3.3% annually, suggesting a decline in affordability over time. For those at the lower end of the market (the 25th percentile), the required national mortgage payment increased to $1,438 in January from $1,375 in December.
“Homebuyer affordability conditions declined in January, with higher home prices pushing loan amounts upward and ultimately offsetting a monthly decline in mortgage rates,” said Edward Seiler, associate vice president of housing economics at MBA. “Mortgage rates have risen throughout February and will likely continue to hamper affordability and prospective homebuyers’ ability to buy heading into spring.”
On a brighter note, the Builders’ Purchase Application Payment Index (BPAPI) showed a small drop in the median mortgage payments for new home purchases, down to $2,501 in January from $2,541 in December.
Read more: How active are first-time homebuyers?
The MBA’s data also revealed that the national mortgage payment to rent ratio (MPRR) fell from 1.47 in the third quarter to 1.40 by the end of the fourth quarter, suggesting that mortgage payments have become more affordable relative to rents. The Census Bureau’s data showed a slight quarterly increase in the national median asking rent to $1,465 in the fourth quarter.
Other key findings from the MBA’s January 2024 PAPI report include:
- The national median mortgage payment increased to $2,134 in January, up $78 from December and $170 from the previous year, marking an 8.6% annual increase.
- FHA loan applicants saw their median mortgage payment rise to $1,830 in January from $1,822 in December and from $1,619 in January 2023.
- For conventional loan applicants, the median mortgage payment increased to $2,147 in January from $2,053 in December to $2,009 in January 2023.
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