National median mortgage payment increases month over month
the Mortgage Bankers Association (MBA) has launched a new Affordability Index aimed at measuring how new mortgage payments vary over time relative to their income.
The new monthly index, called the Purchase requisition payment index (PAPI), is used because an index can simplify the measurement of changes in the underlying data series over time.
Although new, the MBA has worked backwards from today to July 2009 to give the index a solid starting base based on historical data. The PAPI uses MBA data Weekly candidate survey (WAS) which uses loan-level data on 30-year fixed-rate mortgages to derive the loan amount and interest rate needed to calculate monthly loan payments. It then uses data from U.S. Bureau of Labor and Statistics Current population survey (updated quarterly and produced by the United States Census Bureau) and the Report on the employment situation (updated monthly) to find salaries and wages of full-time employees before taxes. He also calibrated the index at 100 with March 2012 data.
It should be noted that the PAPI is a national survey which also provides insight into data by race and ethnicity, but is limited by WAS data which does not take race/ethnicity into consideration.
So what makes the index go up or down? According to the MBA, the PAPI will increase as mortgage loan amounts increase, as mortgage interest rates increase or as incomes decrease. On the other hand, PAPI decreases when loan amounts decrease, interest rates decrease, or income increases.
A component of the index also compares rent levels to mortgage payments. To do this, the MBA compares the 25th percentile and median WAS payment level data to rents for each quarter since July 2009 using the US Census Bureau’s Housing Vacancies and Homeownership survey to find the median asking rent.
So what did the first PAPI find? The national PAPI increased by 8.3% to an index of 146.3 in February 2022, compared to 135.1 in January 2022 and 120.0 in the previous February (an increase of 21.9%). That equates to a $127 jump in month-over-month payments and a $337 jump from a year ago.
“Low unemployment spurred strong income growth at the start of 2022, but homebuyer affordability has declined due to rapidly rising mortgage rates amid strong house price growth,” he said. declared Edward Seiler, MBA Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “The 30-year fixed rate mortgage increased by 73 basis points from December 2021 to February 2022. As loan application amounts increase, the median principal and interest payment of a mortgage applicant in February jumped $127 from January and $337 from a year ago.”
The MBA found that the national median mortgage payment according to new applications for February 2022 is $1,653, down from $1,526 in January and $1,316 the year before. The median payment for an FHA loan turned out to be $1,201 (compared to $1,009 a year ago); a median payment for a conventional loan was $1,749 (down from $1,391 a year ago).
Reflecting an increase in median mortgage application payments, median asking rents rose 1.15%, meaning that mortgage payments for home purchases rose relative to rents. The index found that the national median asking rent during the fourth quarter of 2021 was $1,207
“Asking rents from the first quarter of 2020 to the fourth quarter of 2021 increased by 16%, even exceeding the strong growth in mortgage application payments during this period,” Seiler added. “MBA’s mortgage payment-to-rent ratio is now about the same as it was at the start of the COVID-19 pandemic in March 2020.”
Other notable data found by the report includes:
- The top five states with the highest PAPI were: Idaho (221.3), Nevada (216.5), Arizona (189.4), Utah (181.6) and Washington (180 ,4).
- The top five states with the lowest PAPI were: Washington, DC (86.3), Connecticut (91.8), Alaska (94.8), Iowa (101.2), and Wyoming (104.1).
- Homebuyer affordability declined for black households, with the national PAPI falling from 140.0 in January to 151.6 in February.
- Homebuyer affordability declined for Hispanic households, with the national PAPI falling from 125.9 in January to 136.4 in February.
- Homebuyer affordability fell for white households, with the national PAPI falling from 136.6 in January to 147.9 in February.
Being a new survey, the MBA may change the methodology of this index in the future in the coming months based on feedback. To submit feedback or comments, contact the MBA directly at [email protected]