Today, the Mortgage Bankers Association (MBA) reports that homebuyer affordability fell in November with the national median payment applied for by purchase applicants increasing 0.3% to $2,133 from $2,127 in October.
The increase in the MBA’s Purchase Applications Payment Index (PAPI) indicates a worsening of an ongoing decline in borrower affordability conditions.
Edward Seiler, MBA’s associate vice president of housing economics, and executive director at the Research Institute for Housing America, said that elevated mortgage rates and rising home prices are the culprits behind buyers’ decline in purchasing power, but voiced optimism for originations next year.
“With demographic support for housing demand, and the gradual increase in housing supply that is expected, home sales and purchase originations are expected to grow in 2025 even as affordability challenges persist,” Seiler said.
The MBA’s measure of how new monthly mortgage payments vary across time, relative to income, uses data from MBA’s Weekly Applications Survey (WAS) to generate a mortgage payment-to-income ratio (PIR). The ratio is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings.
Meanwhile, ATTOM’s fourth-quarter Home Affordability Report notes that homeownership demands a historically large portion of wages due to persistently rising home prices.
The ATTOM report includes data for single-family homes and condos, showing that median prices for those residences were less affordable in the fourth quarter of 2024. The major expenses on median-priced homes consume 34% of the average national wage, which is up by one percentage point quarterly and annually. That exceeds the common lending guideline, 28%, used by most lenders.
Wages Stagnate
Typical mortgage payments, property taxes, and insurance, nationwide, continue to eat up larger portions of homeowners’ wages — almost 13 percentage points beyond a low point reached early in 2021, right before interest rates shot up from the lowest levels in decades.
The latest numbers from ATTOM reflect yet another period when annual changes in major expenses on typical single-family homes and condos have outrun changes in average wages around the country. Expense totals have either grown faster or declined less than wages over the past 14 to 15 quarters dating back to 2020.
"At some point, something's got to give,” said Rob Barber, CEO for ATTOM. “Or a growing number of buyers will have no choice but to toss in the towel and wait for home ownership to become more affordable. But, we clearly are not there yet.”
Key findings from the MBA’s report show the national median mortgage payment in November ticked up $6 from October to $2,133 in November, though still down by $4 from last year. By loan type, FHA mortgage payments were $1,898 in November, up by $56 from last month, but down by $4 from last year.
Conventional mortgage payments were $2,133 in November, down $2 from last month and down $4 from last year.
Major home ownership expenses on typical homes sold in the fourth quarter require an annual income of $89,649 to be affordable — 21.3% more than the current average national wage of $73,918. Annual wages of more than $75,000 are needed to pay for major costs on median-priced homes purchased in 325, or 57.4%, of the 566 markets in the report.
That continues to pose major obstacles as average wages exceed that amount in just 13.6% of the counties reviewed.
Home prices overall are growing faster than average wages across three-quarters (75.8%) of the country. Counties where prices have increased more than wages annually include:
- Los Angeles County, Calif.;
- Cook County, (Chicago), Ill.;
- Maricopa County (Phoenix), Ariz.;
- San Diego County, Calif., and
- Orange County, Calif. (outside Los Angeles).
On the other side of the spectrum, year-over-year changes in average annualized wages have bested price movements during the fourth quarter of 2024 in just 137 (24.2%) of the counties analyzed.
Homeownership in the Northeast and West coasts still pose the biggest financial burden for buyers. All but two of the 25 counties where major ownership costs require the largest percentage of average local wages in the fourth quarter of 2024 are on the Northeast or West coasts.
