Mortgage Application Payments Decreased 3.8 Percent to $2,055 in December

January 25, 2024 MBA Research Press Release Purchase Applications Payment Index (PAPI) Residential

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WASHINGTON, D.C. (January 25, 2024) – Homebuyer affordability improved in December, with the national median payment applied for by purchase applicants decreasing to $2,055 from $2,137 in November. 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). 

“Homebuyer affordability improved for the second consecutive month in December as interest rates declined significantly from recent highs,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “While the average median purchase application amount increased to $306,450, MBA expects that affordability conditions will continue to improve as mortgage rates fall further and as housing inventory continues to increase.”

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) decreased 3.8 percent to 161.8 in December from 168.2 in in November. With this decrease, the PAPI is now at the lowest level since January 2023. Median earnings were up 5.5 percent compared to one year ago, and while payments increased 7.1 percent, the strong earnings growth means that the PAPI is up 1.4 percent on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,375 in December from $1,425 in November. 

The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased from $2,597 in November to $2,541 in December.

Additional Key Findings of MBA's Purchase Applications Payment Index (PAPI) – December 2023

  • The national median mortgage payment was $2,055 in December–down $82 from November. It is up $135 from one year ago, equal to a 7.1% increase.
  • The national median mortgage payment for FHA loan applicants was $1,833 in December, down from $1,902 in November and up from $1,602 in December 2022.
  • The national median mortgage payment for conventional loan applicants was $2,053, down from $2,137 in November and up from $1,954 in December 2022.
  • The top five states with the highest PAPI were: Idaho (250.2), Nevada (240.8), Arizona (222.3), Florida (210.7), and Utah (207.6).
  • The top five states with the lowest PAPI were: Wyoming (113.5), Louisiana (118.7), Alaska (121.3), Connecticut (125.0), and New York (128.0).
  • Homebuyer affordability increased for Black households, with the national PAPI decreasing from 164.5 in November to 158.2 in December.
  • Homebuyer affordability increased for Hispanic households, with the national PAPI decreasing from 160.7 in November to 154.5 in December.
  • Homebuyer affordability increased for White households, with the national PAPI decreasing from 171.7 in November to 165.1 in December.
About MBA’s Purchase Applications Payment Index
The Mortgage Bankers Association’s Purchase Applications Payment Index (PAPI) measures how new mortgage payments vary across time relative to income. Higher index values indicate that the mortgage payment to income ratio (PIR) is higher than in a month where the index is lower. Contrary to other affordability indexes that make multiple assumptions about mortgage underwriting criteria to estimate mortgage payment level, PAPI directly uses MBA’s Weekly Applications Survey (WAS) data to calculate mortgage payments.  

PAPI uses usual weekly earnings data from the U.S. Bureau of Labor Statistics’ Current Population Survey (CPS). Usual weekly earnings represent full-time wage and salary earnings before taxes and other deductions and include any overtime pay, commissions, or tips usually received. Note that data are not seasonally adjusted. 

MBA’s Builders’ Purchase Application Payment Index (BPAPI) uses MBA’s Builder Application Survey (BAS) data to create an index that measures how new mortgage payments vary across time relative to income, with a focus exclusively on newly built single-family homes. As with PAPI, higher index values indicate that the mortgage payment to income ratio (PIR) is higher than in a month where the index is lower. To create BPAPI, principal and interest payment amounts are deflated by the same earnings series as in PAPI. 

The rent data series calculated for MBA’s national mortgage payment to rent ratio (MPRR) comes from the U.S. Census Bureau’s Housing Vacancies and Homeownership (HVS) survey’s median asking rent. The HVS data is quarterly, and as such, the mortgage payment to rent ratio will be updated quarterly. The HVS data is quarterly, and as such, the mortgage payment to rent ratio will be updated quarterly. MPRR data was not included in the December 2023 data. 

For additional information on MBA’s Purchase Applications Payment Index, click here.