Homebuyers saw affordability plunge in September as the typical monthly payment rose $102 from August.
The national median payment applied for by applicants jumped to $1,941 from $1,839 in the month prior, the Mortgage Bankers Association reported.
MBA’s Purchase Applications Payment Index fell for a second consecutive month, up 5.5% to a reading of 163.6.
PAPI measures monthly payments across time and relative to income, so this reading indicates that payments on new mortgages accounted for a smaller share of a typical person’s income.
The increase reverses four months of improvement from an index high of 164.2 in May.
“With mortgage rates continuing to rise, the purchasing power of borrowers is shrinking. The median loan amount in September was $305,550 – much lower than the February peak of $340,000,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America.
“MBA expects supply and affordability constraints and economic uncertainty to continue to hamper the purchase market. Purchase origination volume is forecast to decrease 3.3% next year to $1.53 trillion.”
Price appreciation is slowing as mortgage rates force buyers to leave the market.
With competition cooling, sellers can no longer expect a rapid over-asking offer on their homes. Many are slashing prices and making concessions.
“We’re seeing sellers sitting on the market longer, we’re seeing more price reductions because buyers are a little more hesitant… we are also seeing sellers paying closing costs for buyers,” Ken Kaplan, “The No Bull Agent,” told Fox News.
For home shoppers who haven’t been priced out by rising rates, the market has swung in their favor.
“The buyers who are still in the game are finally getting a break from bidding wars, which means they can be picky,” said Raleigh, NC Redfin Agent Pam Lewis.
“Three months ago, buyers were saying, ‘Get me a building with four walls and I’ll make it work.’ Now they have some choices.”
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