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The Mortgage Bankers Association (MBA) has found that homebuyer affordability slid further in May 2023, with the national median payment applied for by purchase applicants increasing month-over-month by 2.5% to $2,165 from $2,112.
This is according to the MBA’s Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time–relative to income–using data from MBA’s Weekly Applications Survey (WAS).
“Homebuyer affordability eroded further in May as prospective buyers continue to grapple with high interest rates and low housing inventory,” said Edward Seiler, MBA's Associate VP, Housing Economics, and Executive Director of the Research Institute for Housing America. “While supply remains low, we do expect that inventory will pick up in the near-term, which will provide more opportunities for borrowers to buy a home.”
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.
Nationwide, the PAPI increased 2.5% to 176.7 in May from 172.4 in April. An increase in the PAPI means that it hit a new record high last month. Compared to May 2022 (163.2), the PAPI was up 7.6%. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,462 in May 2023 from $1,430 in April 2023.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased from $2,445 in April to $2,515 in May.
The national median mortgage payment was $2,165 in May, up from $2,112 in April, and from $2,093 in March. It was up $268 from one year ago, equal to a 14.1% increase.
For FHA applicants, the national median mortgage payment hit $1,802 in May 2023, up from $1,750 in April, and up from $1,430 year-over-year.
The national median mortgage payment for conventional loan applicants was $2,202 in May 2023, up from $2,170 in April 2023, and from $1,960 in May 2022.
Homebuyer affordability decreased for Black households, with the national PAPI increasing from 176.7 in April 2023 to 181.1 in May 2023. Homebuyer affordability fell for Hispanic households, with the national PAPI increasing from 161.1 in April 2023 to 165.1 in May 2023. Homebuyer affordability decreased for White households, with the national PAPI increasing from 173.0 in April 2023 to 177.3 in May 2023.
The top five states reporting the highest PAPI were:
- Nevada (263.4)
- Idaho (258.5)
- Arizona (234.4)
- California (227.7)
- Florida (225.3)
The top five states reporting the lowest PAPI were:
- Connecticut (122.2)
- West Virginia (122.6)
- Alaska (122.6)
- Louisiana (133.7)
- Wyoming (136.8)
Just this week, the MBA reported a slight uptick in application volume, as its latest Weekly Mortgage Applications Survey for the week ending June 23, 2023, found mortgage application volume rising 3% week-over-week, amid a continued volatile rate environment. Slightly lower mortgage rates caused the MBA’s Refinance Index to increase 3% from the previous week, and yet remained 32% lower than the same week one year ago.
