Affordability declines as mortgage application payments rise 8.8% in April

Homebuyer affordability declined in April, with the national median payment requested by homebuyers rising 8.8% to $1,889 from $1,736 in March. It is according to Mortgage Bankers Association‘s (MBA) Purchase Applications Payment Index (PAPI), which measures the change in new monthly mortgage payments over time – relative to income – using MBA’s Weekly Application Survey (WAS) data .

“Rapidly growing home prices, low inventory and an 80 basis point increase in mortgage rates slowed purchase inquiries in April, with the typical borrower’s principal and interest payment increasing by $153 a year. compared to March and $569 from a year ago,” says Edward Seiler, MBA associate vice president for housing economics and executive director of the Research Institute for Housing America. “Despite strong employment and wage growth, housing affordability has deteriorated since the start of the year. Mortgage payments make up a larger share of homebuyer income, and skyrocketing inflation is making it harder for some potential buyers to save up for a down payment or find the extra money they need to pay a larger monthly payment. raised. .”

An increase in the MBA’s PAPI – indicative of declining borrower affordability conditions – means that the mortgage payment-to-income (PIR) ratio is higher due to higher demand loan amounts, higher mortgage rates or a drop in income. A decrease in PAPI – indicating improved affordability for borrowers – occurs when loan application amounts decrease, mortgage rates decrease, or income increases.

MBA’s updated forecast calls for mortgage rates to remain above 5% for most of 2022, but potential buyers should start to see a moderation from the double-digit price appreciation reported for more than 20 years. a year in most of the country,” adds Seiler.

The national PAPI rose 7.8% to 162.7 in April from 150.9 in March, meaning payments on new mortgages make up a larger share of a typical person’s income. Compared to April 2021 (120.2), the index jumped 27%. For borrowers applying for low-payment mortgages (the 25th percentile), the national mortgage payment rose 9.6% to $1,236 from $1,129 in March.

The national median mortgage payment requested by applicants was $1,889 in April, compared to $1,736 in March, $1,653 in February and $1,320 in April 2021. The national median mortgage payment for FHA loan applicants was $1,374 in April, compared to $1,254 in March and $1,000 in April 2021. The national median mortgage payment for conventional loan seekers was $1,967 in April, compared to $1,819 in March and $1,388 in April 2021.

The top five states with the highest PAPI were Idaho (260.2), Nevada (250.7), Arizona (222.3), California (214.7) and Utah (207 ,1). The top five states with the lowest PAPI were Washington, DC (96.7), Connecticut (110.7), Louisiana (111.4), Alaska (113.2), and Wyoming (115.5).

Homebuyer affordability declined for black households, with the national PAPI falling from 153.8 in March to 165.9 in April. Homebuyer affordability declined for Hispanic households, with the national PAPI falling from 144.4 in March to 155.7 in April. Homebuyer affordability declined for white households, with the national PAPI falling from 151.6 in March to 163.5 in April.

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