There was good news for home affordability in August, as the national median mortgage payments applied for by purchase applicants decreased 3.9% month over month, according to the Mortgage Bankers Association (MBA).
The median monthly mortgage payment fell to $2,057 in August, down $83 from July’s $2,140, as per the MBA’s Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time relative to income. MBA reports that the median mortgage payment was also down $113 from one year ago, equal to a decrease of 5.2%.
Between July and August, the national PAPI was down 3.9%, to a reading of 160.7. A declining PAPI score indicates improving borrower affordability conditions. It occurs when loan application amounts decrease, mortgage rates decrease and-or earnings increase.
The MBA’s data mirrored recent findings from Attom, which reported that major expenses (including mortgage payments, property taxes and insurance) on median-priced homes improved slightly in the third quarter of 2024 to require 33.5% of the average national wage. While the August expense level remained virtually unchanged from the same quarter in 2023 and was still well above the traditional 28% lending guideline, it still marked a slight quarterly easing of the cost of homeownership; during the second quarter, it took 34.7% of the average national wage to afford major homeownership expenses.
The MBA reported that the overall trends showed mortgage costs were on the decline.
“Homebuyer affordability conditions improved for the fourth consecutive month, with lower mortgage rates, rising incomes and slower home-price growth giving prospective buyers’ budgets a much-needed boost,” said Edward Seiler, MBA’s associate vice president of housing economics, and executive director of the Research Institute for Housing America. “MBA expects that lower mortgage rates, coupled with increasing housing inventory, will entice additional homebuyers to enter the housing market.”
The MBA found that PAPI is down 8.2% on an annual basis, as median earnings were up 3.2% and mortgage payments decreased 5.2% from August of 2023. The national median mortgage payment for FHA loan applicants was $1,817 in August, down from $1,909 one year ago. Borrowers applying for lower-payment mortgages are finding that the national mortgage payment decreased to $1,388 in August from $1,444 in July.
