According to the Mortgage Bankers Association's latest Purchase Applications Payment Index, U.S. homebuyer affordability was mostly unchanged in May 2022, with the national median payment applied for by applicants up slightly to $1,897 from $1,889 in April.
"The ongoing affordability hit of higher home prices and fast-rising mortgage rates led to a slowdown in purchase applications in May. While the median principal and interest payment only increased $8 from April, a typical borrower is paying $514 more through the first five months of 2022 - a jump of 37.1%," said Edward Seiler, MBA's Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. "Inflationary pressures and rates above 5 percent are both headwinds for the housing market in the coming months. MBA's new forecast anticipates that sales of new and existing homes will fall below 2021 levels."
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 (Figure 1) increased 0.4 percent to 163.4 in May from 162.8 in April, meaning payments on new mortgages take up a larger share of a typical person's income. Compared to May 2021 (120.6), the index jumped 35.5 percent. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased 0.36 percent to $1,241 from $1,236 in April.
Additional Key Findings of MBA's Purchase Applications Payment Index (PAPI) - May 2022