In January, homebuyer affordability across the United States took a hit as the median monthly mortgage payment increased, according to the latest report from the Mortgage Bankers Association (MBA). The data, drawn from MBA's Purchase Applications Payment Index (PAPI), underscores the challenges facing prospective homebuyers amidst rising mortgage rates and escalating home prices.
The national median payment applied for by purchase applicants jumped to $2,134, marking an increase from December's figure of $2,055. This uptick in mortgage payments reflects a broader trend of declining affordability, driven primarily by surging home prices that are pushing loan amounts upward.
“Homebuyer affordability conditions declined in January, with higher home prices pushing loan amounts upward and ultimately offsetting what was a monthly decline in mortgage rates,” MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America Edward Seiler said. “Mortgage rates have risen throughout February and will likely continue to hamper affordability and prospective homebuyers’ ability to buy heading into spring.”
The report highlights that the increase in the PAPI, indicative of declining borrower affordability conditions, was driven by rising application loan amounts and mortgage rates, coupled with a decrease in earnings. This trend is expected to persist, according to Seiler.
Despite median earnings experiencing a 5.2% increase compared to the previous year, the surge in mortgage payments outpaced this growth, resulting in a 3.3% rise in the PAPI on an annual basis. The rise in payments was particularly notable for lower-payment mortgages, with the median mortgage payment for these borrowers increasing to $1,438 in January from $1,375 in December.
However, amidst these national trends, there were variations across states and demographic groups. The report identifies Nevada, Idaho, Arizona, Florida, and South Dakota as the top five states with the highest PAPI, while Louisiana, New York, Connecticut, West Virginia, and Alaska had the lowest PAPI, ranking highest in terms of affordability.
