WASHINGTON – Homebuyer affordability improved in August, with the national median payment applied for by purchase applicants decreasing to $2,100 from $2,127 in August, according to the Mortgage Bankers Association's (MBA) Purchase Applications Payment Index (PAPI).
“Affordability conditions have improved for four straight months, with lower mortgage rates and stronger income growth boosting prospective buyers’ purchasing power,” said Edward Seiler, MBA’s AVP, housing economics, and executive director, Research Institute for Housing America. “MBA is expecting that moderating home-price appreciation, coupled with lower rates, will continue to ease affordability constraints and help to boost activity in the housing market.”
An increase in MBA’s PAPI – indicative of declining borrower affordability conditions – 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 – indicative of improving borrower affordability conditions – occurs when loan application amounts decrease, mortgage rates decrease, or earnings increase, MBA explained.
The national PAPI decreased 1.2% to 157.5 in August from 159.4 in July. Median earnings were up 3.2% compared to one year ago, and while payments increased 2.1%, the significant earnings growth means that the PAPI is down (affordability is higher) 1.1% on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,445 in August from $1,468 in July, MBA explained.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,210 in August from $2,233 in July.