Homebuyer affordability took huge hit in September: MBA

After months of massive rate increases, homebuyer affordability worsened in September as home financing became more expensive.

Borrower affordability conditions declined further as the national median payment applied for by mortgage applicants jumped to $1,941 in September from $1,839 in August, according to the Mortgage Bankers Association (MBA).

MBA's Purchase Applications Payment Index (PAPI) increased 5.5% to 163.6 month over month, ending four consecutive months of decline. The September increase indicates that the mortgage payment to income ratio (PIR) is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings.

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"Homebuyer affordability took an enormous hit in September, with the 75-basis-point jump in mortgage rates leading to the typical homebuyer's monthly payment rising $102 from August," said Edward Seiler, associate vice president of housing economics at MBA. "With mortgage rates continuing to rise, the purchasing power of borrowers is shrinking. The median loan amount in September was $305,550 – much lower than the February peak of $340,000." 

The national median mortgage payment was $1,941 in September, up from $1,839 in August and was 40.4% higher in the first nine months of the year. For borrowers applying for lower-payment home loans (the 25th percentile), the national mortgage payment rose to $1,271 in September from $1,210 the previous month.

"MBA expects supply and affordability constraints and economic uncertainty to continue to hamper the purchase market. Purchase origination volume is forecast to decrease 3.3% next year to $1.53 trillion," Seiler said.

Additional key findings were:

• The national median mortgage payment for FHA loan applicants was $1,566 in September, up from $1,469 in August and $1,022 in September 2021.
• The national median mortgage payment for conventional loan applicants was $2,003, up from $1,901 in August and $1,373 in September 2021.
• The top five states with the highest PAPI were: Nevada (264.4), Idaho (257.0), Arizona (238.5), Utah (217.0), and Florida (210.7).
• The top five states with the lowest PAPI were: Washington, D.C. (107.4), Connecticut (113.2), West Virginia (118.3), Alaska (118.7), and Iowa (120.7).
• Homebuyer affordability decreased for Black households, with the national PAPI increasing from 155.4 in August to 164.0 in September.
• Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 142.0 in August to 149.9 in September.
• Homebuyer affordability decreased for White households, with the national PAPI increasing from 155.3 in August to 163.9 in September.