Buyer affordability declined further in May, with the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI) increasing to a new record high during the month. The national median payment applied for by purchase applicants increased 2.5% in May to $2,165 from $2,112 in April.
“Home buyer affordability eroded further in May as prospective buyers continue to grapple with high interest rates and low housing inventory,” says Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “While supply remains low, we do expect that inventory will pick up in the near term, which will provide more opportunities for borrowers to buy a home.”
An increase in MBA’s PAPI means that the mortgage payment to income ratio is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings. An increase is indicative of declining borrower affordability conditions. In May, the national PAPI increased 2.5% to 176.1 in May, reaching a new record high.
Compared with May 2022, the PAPI is 7.6% higher. The five states with the highest PAPI were Nevada, Idaho, Arizona, California, and Florida while the five states with the lowest PAPI were Connecticut, West Virginia, Alaska, Louisiana, and Wyoming.
For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,462 in May from $1,430 in April. The median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased from $2,445 in April to $2,515 in May. Buyer affordability decreased month over month for Black, Hispanic, and white households, according to the MBA.
The national median mortgage payment for FHA loan applications increased from $1,750 in April to $1,802 in May while the national median mortgage payment for conventional loan applicants increased $32 month over month to $2,202 in May.
