For the second month in a row, the national median mortgage payment applied for by applicants decreased from $1,893 to $1,844 in July, according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI). Out of 50 states, 47 had lower PAPI values in July than in June, including nine of the top 10 with highest PAPI values in the country. The index measures how new monthly mortgage payments change by using data from MBA’s Weekly Applications Survey.
While an improvement in affordability, monthly payments are still up by $461 in the first seven months of the year equal to a 33.3% increase. “Affordability conditions improved modestly in most of the country in July, as slightly lower mortgage rates and a decrease in the median loan amount led to the typical home buyer’s mortgage payment falling $49 from June,” says Edward Seiler, MBA’s associate vice president, housing economics, and executive director at the Research Institute for Housing America.
“Home buyer demand has faltered this summer, as lingering economic uncertainty, high inflation, and still-high mortgage rates caused many prospective buyers to delay their home search. The combination of a strong job market and moderating home-price growth could entice some of these buyers to return in the coming months.”
In July, the national PAPI decreased 3.8% to 157.7 from 163.9 in June, which means that new mortgage payments take up a smaller amount of a person’s income. Compared with a year ago, the index jumped 35.2% from 116.6. Among borrowers applying for lower-payment mortgages, the national mortgage payment decreased from $1,241 in June to $1,210 in July.
Home buyer affordability increased across all households including Black, Hispanic, and white. The index also revealed the top five states with the highest and lowest PAPI. The highest included Idaho, Nevada, Arizona, Utah, and Florida, while the lowest included Washington, D.C., Connecticut, Alaska, Louisiana, and West Virginia.
Regarding rent, MBA’s national mortgage payment to rent ratio increased to 1.44 at the end of the second quarter from 1.38 at the end of the first. The shows that mortgage payments for home purchases have increased relative to rents. For the second quarter, the national median asking rent has increased 4.7% on a quarterly basis to $1,314. Seiler adds, “Rent growth has remained incredibly strong in recent quarters, but the influx of new developments coming onto the market should alleviate some of the affordability pressures that are affecting renters in many parts of the country.”
