Residential Real Estate News
U.S. Homebuyer Affordability Further Declined in May
Mortgage Application Payments Increased 2.5 Percent to $2,165 in May
According to the Mortgage Bankers Association's latest Purchase Applications Payment Index, U.S. homebuyer affordability declined further in May 2023, with the national median payment applied for by purchase applicants increasing 2.5 percent to $2,165 from $2,112 in April 2023.
"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 Vice President, Housing Economics, and Executive Director, 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.
The national PAPI increased 2.5 percent to 176.7 in May from 172.4 in April. The increase means that the PAPI hit a new record high last month. Compared to May 2022 (163.2), the index is up 7.6 percent. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,462 in May from $1,430 in April.
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.
Key Findings of MBA's Purchase Applications Payment Index May 2023
- The national median mortgage payment was $2,165 in May, up from $2,112 in April and from $2,093 in March. It is up $268 from one year ago, equal to an 14.1% increase.
- The national median mortgage payment for FHA loan applicants was $1,802 in May, up from $1,750 in April and up from $1,430 in May 2022.
- The national median mortgage payment for conventional loan applicants was $2,202, up from $2,170 in April and from $1,960 in May 2022.
- The top five states with the highest PAPI were: Nevada (263.4), Idaho (258.5), Arizona (234.4), California (227.7), and Florida (225.3).
- The top five states with the lowest PAPI were: Connecticut (122.2), West Virginia (122.6), Alaska (122.6), Louisiana (133.7), and Wyoming (136.8).
- Homebuyer affordability decreased for Black households, with the national PAPI increasing from 176.7 in April to 181.1 in May.
- Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 161.1 in April to 165.1 in May.
- Homebuyer affordability decreased for White households, with the national PAPI increasing from 173.0 in April to 177.3 in May.
