Key facts
- Homebuyer affordability improved modestly in August.
- The median monthly mortgage payment for purchase applicants fell to $2,162 in August.
- The Purchase Applications Payment Index (PAPI) fell 0.6% to 154.3 in August.
- Affordability improved 1.1% from a year earlier.
- Idaho had the highest PAPI in August at 258.6.
- The District of Columbia had the lowest PAPI reading at 113.9.
Homebuyer affordability in the US saw a modest improvement in August, as the median monthly mortgage payment for purchase applicants fell to $2,162, down from $2,175 in July, according to the Mortgage Bankers Association (MBA)’s latest Purchase Applications Payment Index (PAPI).
The PAPI, which measures changes in mortgage payments relative to borrower income, fell 0.6% to a reading of 154.3 in August. This indicates that mortgage payments accounted for a smaller share of borrower income compared to the previous month.
Affordability also improved from a year earlier. While mortgage payments rose 2.9% over the past 12 months, household earnings increased by 4.1%, resulting in a 1.1% decrease in the PAPI.
Edward Seiler, MBA’s associate vice president of housing economics, stated that the slight improvement in affordability was due to a decline in the median purchase loan amount, which offset higher mortgage rates. However, he cautioned that affordability remains challenging, with 27 states experiencing declines in August. Sustained improvement, he noted, will depend on lower mortgage rates, continued income growth, and slower home-price appreciation.
The median mortgage payment for borrowers applying for lower-payment loans (at the 25th percentile) decreased to $1,492 in August from $1,512 in July. For Federal Housing Administration (FHA) loan applicants, the median payment was $1,856 in August, down from $1,901 in July. Conventional loan applicants saw a slight increase in their median payment to $2,188 from $2,184 in July.
Idaho recorded the highest PAPI in August at 258.6, followed by Nevada (229.8), Rhode Island (213.7), Arizona (204.0), and Tennessee (193.5). The lowest readings were in the District of Columbia (113.9), Louisiana (114.2), West Virginia (120.8), Connecticut (124.5), and New York (125.3).
Among demographic groups, the PAPI for Black households fell to 154.9 in August from 155.8 in July. The index for Hispanic households declined to 142.7 from 143.6, and for white households, it fell to 157 from 157.9.
Separately, the MBA’s Builders’ Purchase Application Payment Index, which tracks mortgage payments for newly built single-family homes, saw a slight increase, with the median payment rising to $2,214 in August from $2,210 in July.