February's numbers show affordability isn’t improving just yet
Affordability remained a sticking point for homebuyers in February, with no change in the national median mortgage payment and a housing market still grappling with high prices and uncertainty.
The national median payment for purchase loan applicants stayed at $2,205 last month, unchanged from January, according to the Mortgage Bankers Association (MBA). The MBA’s Purchase Applications Payment Index (PAPI), which reflects how mortgage payments compare to income levels, rose slightly by 0.1% to 166.2. That means affordability conditions remain tight for many borrowers, even as mortgage rates inch downward.
“Homebuyer affordability conditions remained unchanged in February as many homebuyers continue to weigh their options on entering the housing market amid economic uncertainty and slowly declining mortgage rates,” Edward Seiler, MBA’s associate vice president of housing economics, said in the report.
“While February’s data reflects little movement, we do expect that rising housing inventory, coupled with lower mortgage rates, will spur additional activity in the housing market.”
Although mortgage payments rose by 1% year-over-year, strong income growth, up 5% from last year, helped ease some of the pressure. On an annual basis, the PAPI is actually down 3.8%, indicating a slight improvement in affordability year-over-year.
For those applying for lower-payment mortgages (in the 25th percentile), the typical monthly payment dropped to $1,506 in February from $1,519 the month before.
Still, homeownership remains a stretch for many. The median home-sale price is up 3% year-over-year, according to Redfin, and the average mortgage rate is sitting at 6.67%, more than double the levels seen during the pandemic. While rates have declined from January’s high of 7.04%, monthly payments would be even higher without that shift.
High prices and borrowing costs continue to weigh on the market. Pending home sales are down 4.6% from a year ago. But signs of life are emerging as the spring season begins. ShowingTime data suggests home tours are picking up faster than they were this time last year, and Google searches for “homes for sale” are at their highest point since August.
Read next: Pending home sales on the rise again
New listings, meanwhile, are outpacing buyer activity. Listings are up 7.5% year-over-year—the largest gain so far this year, which could create more opportunities for buyers if mortgage rates continue to decline.
MBA’s Builder Application Payment Index (BPAPI) also showed a decline in payments. The median mortgage payment for new-home purchase loans dropped to $2,463 in February from $2,531 in January.
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