The national median payment applied for by mortgage applicants dropped slightly in June, down to $1,893 from May’s $1,897, the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI) found.
PAPI measures the variations in new monthly mortgage payments across time and relative to income. The national PAPI fell 0.2% to a read of 163.9 in June, indicating that new mortgages account for a smaller share of a typical person’s income.
A decrease in PAPI shows affordability improving for borrowers due to loan application amounts or mortgage rates falling, or earnings rising.
But affordability remains high compared to the same time last year, with the index up 37.4% YOY.
“Median mortgage applications payments have held steady during the last two months but remain much higher than earlier this year. The typical homebuyer’s mortgage payment in June was $509 more than in January, which is why – along with rising economic uncertainty and high inflation – purchase demand has slowed in markets across the country,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America.
“There are signs that home-price growth is moderating, which is good news for overall affordability if mortgage rates also start declining.”
The national median mortgage payment for FHA applicants was $1,474. For conventional loan applicants, it was $1,959.
Even a slight dip in homebuying costs is a good sign in the hot housing market, where affordability recently reached its lowest point since 2006.
Black households in particular struggle when prices soar. MBA’s data showed that affordability declined for Black households, while it increased for Hispanic and white families.
Black Americans face systemic issues that pile up as affordability drops, such as a lack of intergenerational wealth that can be used for down payments, unfair credit scoring, and high debt.
Communities of color were also disproportionately impacted by the 2008 housing crisis and have yet to recover fully.
“During the last housing cycle, during the bubble, all the evidence I’ve seen showed that African Americans were impacted in a heavy way because of the loss of their home values, and they were disproportionately affected by foreclosures,” Brad O’Connor, an economist with trade group Florida Realtors, told The Hill.
“If you’ve got an affordability issue right now, it’s hard to compete against cash buyers.”
Seiler noted that 16 states saw affordability improve due to lower mortgage application amounts in June. The states with the lowest PAPI, with the highest affordability reads, were Washington, D.C., Connecticut, Alaska, West Virginia, and Louisiana.
The states with the lowest affordability were Idaho, Nevada, Arizona, Utah, and Florida.