Affordability slips again as mortgage application payments rise nearly 9%

Homebuyer affordability continued to erode in April, with the Mortgage Bankers Association (MBA) reporting that the national median payment applied for by mortgage seekers rose to $1,889.

That’s up 8.8% from the $1,736 figure in March and up 43.1% compared to April 2021, according to the MBA data. The increase correlates with a rise in the MBA’s Purchase Applications Payment Index, which rose 7.8% month over month and 27% year over year in April to a reading of 162.7. Increases in this index indicate that the typical mortgage payment-to-income ratio for borrowers is higher, due to factors such as rising application loan amounts, higher mortgage rates or lower earnings. Conversely, decreases in the index signal improving affordability.

“Rapid home-price growth, low inventory and an 80-basis-point surge in mortgage rates slowed purchase applications in April, with the typical borrower’s principal and interest payment increasing $153 from March and $569 from a year ago,” said Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “Despite strong employment and wage growth, housing affordability has worsened since the start of the year.

“Mortgage payments are taking up a larger share of homebuyers’ incomes, and sky-high inflation is making it more difficult for some would-be buyers to save for a downpayment or come up with the additional cash they need to afford a higher monthly payment.”

Median payments applied for by applicants of different loan types was up across the board. The national median payment for Federal Housing Administration loan applicants was $1,374 in April, up from $1,254 in March and up from $1,000 in April 2021. For conventional loan applicants, the median payment was $1,967, up from $1,819 a month earlier and up from $1,388 a year earlier.

Among all states, Idaho had the highest April index at 260.2, indicating weakening affordability for prospective homebuyers. The District of Columbia had the lowest reading at 96.7.

While affordability as measured by the Purchase Applications Payment Index has steadily weakened over the past few months, Seiler said that home-price growth should begin to cool soon, offering hope for potential buyers despite projections of ongoing rate hikes.

“MBA’s updated forecast calls for mortgage rates to remain above 5% for most of 2022, but prospective homebuyers should start to see moderation from the double-digit price appreciation reported for well over a year in most of the country,” Seiler said.


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