Home Affordability Got a Boost in Time for Christmas

According to the Mortgage Bankers Association's (MBA) latest Purchase Applications Payment Index (PAPI), homebuyer affordability improved in December. The report showed that in November, the national median payment for purchase applicants decreased to $2,055 from $2,137.

The PAPI measures how new monthly mortgage payments vary across time, relative to income, using data from MBA’s Weekly Applications Survey (WAS).

“Homebuyer affordability improved for the second consecutive month in December as interest rates declined significantly from recent highs,” said Edward Seiler, MBA’s Associate VP of Housing Economics and Executive Director for the Research Institute for Housing America.

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.

The national PAPI decreased 3.8% to 161.8 in December from 168.2 in November. With this decrease, the PAPI is now at its lowest level since January 2023. Median earnings were up 5.5% compared to one year ago, and while payments increased 7.1%, the strong earnings growth means that the PAPI is up 1.4% on an annual basis.

The Top Five States with the Highest PAPI:

1. Idaho (250.2)
2. Nevada (240.8)
3. Arizona (222.3)
4. Florida (210.7)
5. Utah (207.6)

The Top Five States with the Lowest PAPI:

1. Wyoming (113.5)
2. Louisiana (118.7)
3. Alaska (121.3)
4. Connecticut (125.0)
5. New York (128.0)

For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,375 in December from $1,425 in November.

The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased from $2,597 in November to $2,541 in December.

“While the average median purchase application amount increased to $306,450, MBA expects that affordability conditions will continue to improve as mortgage rates fall further and as housing inventory continues to increase," said Seiler.

Key Findings of MBA's Purchase Applications Payment Index (PAPI)—December 2023:

• The national median mortgage payment was $2,055 in December, down $82 from November. It is up $135 from one year ago, equal to a 7.1% increase.
• The national median mortgage payment for FHA loan applicants was $1,833 in December, down from $1,902 in November and up from $1,602 in December 2022.
• The national median mortgage payment for conventional loan applicants was $2,053, down from $2,137 in November and up from $1,954 in December 2022.
• Homebuyer affordability increased for Black households, with the national PAPI decreasing from 164.5 in November to 158.2 in December.
• Homebuyer affordability increased for Hispanic households, with the national PAPI decreasing from 160.7 in November to 154.5 in December.
• Homebuyer affordability increased for white households, with the national PAPI decreasing from 171.7 in November to 165.1 in December.

To read the full report, including more data, charts, and methodology, click here.