The Mortgage Bankers Association (MBA) reported on Thursday (9-28-23) that according to its Purchase Applications Payment Index (PAPI)—which measures how new monthly mortgage payments vary across time, relative to income, using data from MBA’s Weekly Applications Survey—homebuyer affordability declined in August. The national medium payment applied for by applications increased to $2,170, up from $2,162 in July.
An increase in the 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 0.4% to a reading of 175.4 in August, up from a reading of 174.7 in July. With this increase, the PAPI is now only 2 points lower than its record level set in May. Median earnings were up 4.2% compared to one year ago, while payments increased by 18.0%. The strong earnings growth means that the PAPI is up 13.2% year-over-year.
For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased in August to $1,444, down from $1,451 in July.
The Builder’s Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased from $2,526 in July to $2,526 in August.
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