MBA reports improved affordability for homebuyers
Homebuyer affordability conditions improved in May as slightly lower mortgage rates and an uptick in housing inventory eased borrowing costs, according to the latest Mortgage Bankers Association report.
The national median payment applied for by purchase applicants decreased to $2,219 in May. This slashed application payment costs by $37 month over month, but still up 2.5% from the same period last year.
The MBA’s Purchase Applications Payment Index (PAPI), which reflects changes in monthly mortgage payments relative to income, fell 1.6% in May, dropping to 173.9 from 176.8 in April. This indicates improved affordability. Median earnings rose 4.6% compared to last year, offsetting a 2.5% increase in payments and resulting in a 2% annual decrease in the PAPI.
For those applying for lower-payment mortgages, the median payment fell to $1,508 in May from $1,537 in April. The Builders’ Purchase Application Payment Index (BPAPI) indicated a decrease in median mortgage payments for new homes, dropping to $2,522 in May from $2,604 in April.
Read more: New home sales slump to six-month low
The FHA loan applicants saw their median mortgage payment decrease to $1,924 in May, down from $1,955 in April but up from $1,802 in May 2023. Conventional loan applicants experienced a similar trend, with their median payment falling to $2,226 in May from $2,271 in April, though still higher than the $2,202 recorded in May 2023.
“MBA is forecasting for mortgage rates to fall closer to 6.5% by the end of the year, which, along with rising inventory levels and a subsequent slowdown in home-price growth, should help affordability amounts,” said Edward Seiler, MBA’s associate vice president of housing economics, and executive director of Research Institute for Housing America.
The report also highlighted state-level differences in affordability. Idaho (262.9), Nevada (258.3), and Arizona (231.4) had the highest PAPI scores, indicating lower affordability. In contrast, Louisiana (127.4), Connecticut (131.4), and New York (132.2) had the lowest PAPI scores, suggesting better affordability conditions.
Affordability improved across different demographic groups. The national PAPI for Black households decreased from 183.1 in April to 180.1 in May. Hispanic households decreased from 168.9 to 166.1, while White households experienced a drop from 179.4 to 176.5.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
