Month sees stability in costs amid volatile rate movements
Homebuyer affordability saw slight improvement in December, with the national median mortgage payment for purchase applicants declining marginally to $2,127 from $2,133 in November, according to the Mortgage Bankers Association (MBA).
“Homebuyer affordability conditions were essentially flat in December, the result of somewhat volatile mortgage rate movements and moderating home-price growth,” said Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America.
“2024 was a sluggish year for home sales because of weak affordability conditions throughout the country. MBA expects 2025 conditions will improve as housing supply increases, giving prospective buyers more options and putting less pressure on their budgets.”
The MBA’s Purchase Applications Payment Index (PAPI), which tracks changes in mortgage payments relative to income, declined slightly by 0.3% to 160.8 in December. MBA noted that this decrease suggests a modest improvement in affordability, supported by a 4.1% rise in median earnings over the past year. However, the index remains higher compared to historical levels.
For lower-payment mortgages (25th percentile), the national mortgage payment rose to $1,446 in December from $1,436 in November. The Builders’ Purchase Application Payment Index (BPAPI), which focuses on mortgage payments for newly built homes, showed an increase in the median payment to $2,500 from $2,481 the previous month.
The MBA’s data highlighted affordability variations across loan types and geographic locations:
- The national median mortgage payment for FHA loan applicants declined to $1,866 in December from $1,898 in November.
- Conventional loan applicants saw a slight decrease in median mortgage payments to $2,128 from $2,133 in November.
- The states with the highest PAPI, indicating the least affordability, were Idaho (249.5), Nevada (249.0), Arizona (230.3), Rhode Island (206.3), and Florida (205.8).
- The states with the lowest PAPI, signaling greater affordability, were Connecticut (115.2), Alaska (117.3), Louisiana (118.9), Washington, D.C. (121.3), and Vermont (122.1).
- Affordability improved across racial demographics, with the PAPI decreasing for Black, Hispanic, and White households.
“Mortgage applications declined for the first time in three weeks, as both homeowners and homebuyers navigate higher borrowing costs,” said president and CEO Bob Broeksmit. “While refinance activity is slightly higher than year-ago levels, purchase activity is down 7%. MBA anticipates that demand will pick up as the spring homebuying season gets underway, and the uptick in housing supply should help to alleviate home-price growth pressures.”
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