WASHINGTON– Homebuyer affordability declined in January, with the national median payment applied for by purchase applicants increasing to $2,070 from $2,025 in December, according to the Mortgage Bankers Association's (MBA) Purchase Applications Payment Index (PAPI).
“Housing affordability declined in January, with the national PAPI increasing for the first time in seven months and applicants’ median monthly payment up $45 compared to December,” said Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “While the median purchase application amount rose from $320,000 to $332,000, mortgage rates declined over the month. With mortgage rates mostly trending downward, and home-price growth flat or down in many markets, affordability conditions should improve in the months ahead as housing inventory increases.”
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 said.
The national PAPI (Figure 1) increased 1.0% to 150.3 in January from 148.8 in December. While payments decreased 6.1%, earnings growth of 4.0% means that the PAPI is down (affordability is higher) 9.7% on an annual basis. For borrowers applying for lower-payment mortgages (the 25th%ile), the national mortgage payment increased to $1,445 in January from $1,413 in December.