Home buyer affordability decreased in February, with the national median payment applied for by applicants increasing 8.3% to $1,653 from $1,526 in January, according to the Mortgage Bankers Association’s (MBA) new Purchase Applications Payment Index (PAPI). The PAPI measures how new monthly mortgage payments vary across time, relative to income, using data from the MBA’s Weekly Applications Survey.
According to the MBA, the national median mortgage payment for FHA loan applications increased from $1,142 in January to $1,201 in February. The national median mortgage payment for conventional loan applicants increased from $1,582 in January to $1,749 in February.
“Low unemployment has spurred strong income growth in early 2022, but home buyer affordability has decreased due to the quick rise in mortgage rates amid steep home-price growth,” says Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “The 30-year fixed-rate mortgage spiked 73 basis points from December 2021 through February 2022. Together with increased loan application amounts, a mortgage applicant’s median principal and interest payment in February jumped $127 from January and $337 from one year ago.”
An increase in the PAPI, indicative of declining borrowing affordability conditions, means the mortgage payments to income ratio is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings.
The national PAPI increased 8.3% to 146.3 in February from 135.1 in January, indicating payments on new mortgages take up a larger share of a typical person’s income. The national index reading increased 21.9% on a year-over-year basis.
Idaho (221.3), Nevada (216.5), Arizona (189.4), Utah (181.6), and Washington (180.4) recorded the highest PAPI values; Washington, D.C. (86.3), Connecticut (91.8), Alaska (94.8), Iowa (101.2), and Wyoming (104.1) posted the lowest PAPI values in February.
According to the MBA, the national mortgage payment increased 9.8% to $1,094 for borrowers applying for lower-payment mortgages.
The MBA found buyer affordability decreased for Black, Hispanic, and white households in February. The national PAPI increased to 151.6 from 140.0 in January for Black households, increased to 136.4 from 125.9 for Hispanic households, and increased to 147.9 from 136.6 for white households.
The MBA’s national mortgage payment to rent ratio—which compares median purchase mortgage application payments with median asking rents in December 2021 from November 2021—increased to 1.15 from 1.14, indicating mortgage payments for home purchases have increased relative to rents. The median asking rent for the fourth quarter of 2021 nationally was $1,207.
“Asking rents from first quarter 2020 to fourth quarter 2021 increased 16%, even outpacing the steep growth in mortgage application payments over that period,” Seiler says. “MBA’s mortgage payment to rent ratio is now at roughly the same level it was at the start of the COVID-19 pandemic in March 2020.”
