Median mortgage payments down, boosting purchasing power
Homebuyer affordability improved for the fifth straight month in September, reaching its highest level since August 2022, according to the Mortgage Bankers Association (MBA).
MBA’s national Purchase Applications Payment Index (PAPI), which tracks affordability shifts by comparing new mortgage payments to income levels, fell to 157.9 in September, down 0.8% from August’s 159.2.
“Homebuyer affordability conditions improved for the fifth consecutive month, as mortgage rates near the low 6% range improved purchasing power for prospective buyers,” said Edward Seiler, MBA’s associate vice president of housing economics and executive director at Research Institute for Housing America. “Overall affordability is now at its highest level since August 2022, but the recent jump in rates will likely cause conditions to plateau.”
This marked the lowest index level since August 2022, reflecting a consistent decline over the last five months. Mortgage rates dropped by 31 basis points from August to September, contributing to improved affordability across nearly all states, with only 10 states experiencing affordability declines.
“MBA is forecasting for rates to be around 6.3% by the end of the year,” Seiler said.
For lower-payment mortgage applicants, monthly payments at the 25th percentile fell from $1,388 in August to $1,369 in September, demonstrating the broad impact of recent rate reductions.
Median mortgage payments on purchase applications dropped across various loan types, with the national median payment settling at $2,041 in September, $16 lower than in August and $114 less than a year ago.
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FHA loan applicants saw median payments decrease to $1,753, down from $1,817 in August. Conventional loan applicants experienced a slight dip as well, with median payments at $2,053 in September, compared to $2,056 in August.
The states with the highest PAPI scores, indicating more challenging affordability, were Idaho (238.4), Nevada (236.7), Arizona (210.3), Florida (202.5), and Rhode Island (197.5). By contrast, the lowest PAPI scores, reflecting more favorable affordability, were in Louisiana (109.6), Connecticut (115.7), New York (119.0), West Virginia (121.0), and Alaska (124.8).
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