It became more expensive to buy a home in January, the Mortgage Bankers Association (MBA) said Thursday.
The national median payment applied for by purchase applicants increased 2.3% to $1,964 in January from $1,920 in December 2022, according to the MBA’s Purchase Applications Payment Index (PAPI). The index measures how new monthly mortgage payments vary across time — relative to income — using data from MBA’s Weekly Applications Survey (WAS).
“Although interest rates fell 16 basis points from December 2022 to January, homebuyer affordability declined slightly due to the increase in the median purchase application amount,” which increased $12,000 to $312,000, said Edward Seiler, MBA's associate vice president, housing economics, and executive director of the Research Institute for Housing America. “MBA expects the combination of economic uncertainty, high mortgage rates, and persisting affordability challenges to impact purchase demand — especially at the lower end of the market where supply is still tight.”
An increase in the PAPI – which indicates it’s getting more expensive for borrowers — means that the mortgage payment-to-income ratio (PIR) is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings. A decrease in the PAPI — indicating it is less expensive for borrowers — occurs when loan application amounts decrease, mortgage rates decrease, or earnings increase.
Nationwide, the PAPI increased 0.9% to 160.9 in January from 159.5 in December. Even though the PAPI increased in January, the current PAPI is 6.3 points down from its high in October 2022. Compared to January 2022 (132.7), the index is up 21.2% from a year ago.
For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,322 in January from $1,279 in December, the MBA said.
The Builders’ Purchase Application Payment Index (BPAPI), meanwhile, showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased in January to $2,379, from $2,399 in December 2022.
MBA’s national mortgage payment-to-rent ratio (MPRR) decreased from 1.50 at the end of the third quarter (September 2022) to 1.45 at the end of the fourth quarter (December 2022), meaning mortgage payments for home purchases have decreased compared to rents. The national median asking rent in fourth-quarter 2022 decreased 0.9% on a quarterly basis to $1,322, from $1,334 in third-quarter 2022.
The 25th-percentile mortgage application payment-to-median-asking-rent ratio was 0.96 in December, down from 0.97 in September, the MBA said.
Additional Key Findings:
- The national median mortgage payment was $1,964 in January, up from $1,920 in December but down from $1,977 in November. It is up by $437 from a year ago, a 28.7% increase.
- The national median mortgage payment for FHA loan applicants was $1,619 in January, up from $1,602 in December 2022 and from $1,142 in January 2022.
- The national median mortgage payment for conventional loan applicants was $2,009, up from $1,954 in December 2022 and from $1,582 in January 2022.
- The five states with the highest PAPI were: Nevada (248.2), Idaho (239.8), Utah (217.9), Arizona (216.6), and Florida (203.1).
- The five states or territories with the lowest PAPI were: Washington, D.C. (103.4), North Dakota (107.8), Connecticut (108.5), Arkansas (112.4), and West Virginia (117.8).
- Homebuyer affordability decreased for Black households, with the national PAPI increasing from 159.5 in December to 160.9 in January.
- Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 152.5 in December to 153.8 in January.
- Homebuyer affordability decreased for White households, with the national PAPI increasing from 160.6 in December to 162.0 in January.
