According to the Mortgage Banker Association’s (MBA) new Purchase Application Payment Index (PAPI), homebuyer affordability declined in March, with the national median payment applied for by applicants rising 5.0% from $1,653 in February to $1,736 in March.
The PAPI measures how new monthly mortgage payments vary across time, relative to income and using data from MBA’s Weekly Application Survey (WAS).
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.
In a statement prepared for the inaugural release of the PAPI, Edward Seiler, MBA’s Associate Vice President for Housing Economics and Executive Director of the Research Institute for Housing America, said:
“The start of the spring homebuying season is off to a mixed start. The healthy labor market and robust wage gains fueled demand throughout the country in March, but rapid home-price growth and the 42-basis-point surge in mortgage rates last month slowed purchase application activity. A typical borrower’s principal and interest payment was $387 more than in March 2021. Swift price-appreciation, sky-high inflation, low inventory, and mortgage rates now two percentage points higher than last year are all headwinds for the housing market in the coming months—especially for first-time buyers.
MBA’s updated forecast calls for an annual decline in existing sales, higher home prices and mortgage rates, and a smaller but solid 4 percent gain in purchase origination volume.”
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