Key facts
- The median monthly mortgage payment for purchase applicants fell to $2,175 in July, down from $2,191 in June.
- Despite a 2.2% annual increase in mortgage payments, wage growth outpaced this rise, improving overall affordability.
- Affordability improved for Black, Hispanic, and white households in July.
- The national mortgage payment-to-rent ratio increased to 1.43 in the second quarter.
- For new single-family homes, the median mortgage payment rose to $2,210 in July.
Homebuyer affordability improved in July as the median monthly mortgage payment for purchase applicants fell to $2,175, down from $2,191 in June, according to the Mortgage Bankers Association (MBA)’s Purchase Applications Payment Index (PAPI). The July payment was $48 higher than a year earlier, a 2.2% increase, but wage growth outpaced this rise, contributing to better affordability.
Edward Seiler, MBA’s associate vice president of housing economics, stated that a decline in the median loan amount offset a modest increase in mortgage rates. Affordability also improved on an annual basis as earnings growth continued to outpace the increase in mortgage payments. The median payment for borrowers applying for lower-payment mortgages fell to $1,512 in July from $1,522 in June.
Affordability varied significantly by state, with Idaho reporting the highest PAPI reading at 247.2 and Louisiana the lowest at 113.0. The median mortgage payment for FHA applicants increased to $1,901 in July, while for conventional loan applicants, it fell to $2,184. Affordability also improved across racial and ethnic groups, with the PAPI for Black, Hispanic, and white households all declining.
Meanwhile, the national mortgage payment-to-rent ratio rose to 1.43 at the end of the second quarter, indicating that mortgage payments increased relative to rents. For newly built single-family homes, the MBA’s Builders’ PAPI showed the median mortgage payment increased to $2,210 in July. Seiler noted that future affordability will depend on mortgage rates and home price growth.