Mortgage Application Payments Increased 2.3 Percent to $1,964 in January
WASHINGTON, D.C. (February 23, 2023) – Homebuyer affordability declined in January, with the national median payment applied for by purchase applicants increasing 2.3 percent to $1,964 from $1,920 in December 2022. This is according to the Mortgage Bankers Association's (MBA) 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 (WAS).
“Although interest rates fell 16 basis points from December 2022 to January, homebuyer affordability declined slightly due to the increase in the median purchase application amount, which inched up $12,000 to $312,000,” said Edward Seiler, MBA's Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “MBA expects the combination of economic uncertainty, high mortgage rates, and persisting affordability challenges to impact purchase demand – especially at the lower end of the market where supply is still tight.”
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.
The national PAPI (Figure 1) increased 0.9 percent to 160.9 in January from 159.5 in December. Even though there was an increase in the January PAPI, the current PAPI is 6.3 points down from the series high in October 2022. Compared to January 2022 (132.7), the index is up 21.2 percent compared to year-ago levels. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,322 in January from $1,279 in December.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,379 in January compared to $2,399 in December 2022.
MBA’s national mortgage payment to rent ratio (MPRR) decreased from 1.50 at the end of the third quarter (September 2022) to 1.45 at the end of the fourth quarter (December 2022), meaning mortgage payments for home purchases have decreased relative to rents. The national median asking rent in fourth-quarter 2022 decreased 0.9 percent on a quarterly basis to $1,322 ($1,334 in third-quarter 2022). The 25th percentile mortgage application payment to median asking rent ratio was 0.96 in December, down from 0.97 in September.
Additional Key Findings of MBA's Purchase Applications Payment Index (PAPI) – January 2023
- The national median mortgage payment was $1,964 in January, up from $1,920 in December but down from $1,977 in November. It is up by $437 from one year ago, equal to a 28.7% increase.
- The national median mortgage payment for FHA loan applicants was $1,619 in January, up from $1,602 in December 2022 and from $1,142 in January 2022.
- The national median mortgage payment for conventional loan applicants was $2,009, up from $1,954 in December 2022 and from $1,582 in January 2022.
- The top five states with the highest PAPI were: Nevada (248.2), Idaho (239.8), Utah (217.9), Arizona (216.6), and Florida (203.1).
- The top five states with the lowest PAPI were: Washington, D.C. (103.4), North Dakota (107.8), Connecticut (108.5), Arkansas (112.4), and West Virginia (117.8).
- Homebuyer affordability decreased for Black households, with the national PAPI increasing from 159.5 in December to 160.9 in January.
- Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 152.5 in December to 153.8 in January.
- Homebuyer affordability decreased for White households, with the national PAPI increasing from 160.6 in December to 162.0 in January.