Mortgage Affordability Improved in August

Mortgage affordability improved in August, with the national median payment for homebuyers falling to $2,100 from $2,127 in July, according to the Mortgage Bankers Association’s latest index.

This marks the fourth straight month of better affordability, helped by lower mortgage rates and rising wages, giving buyers some relief in a tough market.

Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America, expects that slower home price growth and lower rates will continue to make homes more affordable and support more activity in the housing market.

The national PAPI (Purchase Applications Payment Index) fell 1.2% to 157.5 in August from 159.4 in July. This reflects a 1.1% improvement in affordability year-over-year.

Median earnings rose 3.2% compared to last year, outpacing the 2.1% increase in typical mortgage payments.

For borrowers seeking lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,445 from $1,468.

FHA applicants saw their median payment edge down to $1,863, while conventional loan applicants experienced a larger drop to $2,112 from $2,160 in July.

The five states with the highest affordability challenges, as measured by PAPI, were Idaho, Nevada, Arizona, Rhode Island, and Utah.

In contrast, Alaska, Louisiana, D.C., Connecticut, and New York posted the lowest PAPI readings, indicating relatively better affordability.

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Affordability improved for Black, Hispanic, and White households, with each group’s PAPI declining in August. The index for Black households fell from 158.9 to 156.9, for Hispanic households from 148.5 to 146.6, and for White households from 160.5 to 158.5.

The Builders’ Purchase Application Payment Index (BPAPI), which tracks payments for newly built single-family homes, also showed a decrease, with the median payment dropping to $2,210 from $2,233.

While the recent dip in payments offers some respite, the national median mortgage payment remains $43 higher than a year ago—a 2.1% rise.

US mortgage rates increased for the first time since July, after several weeks of declines.

Freddie Mac reported the average 30-year fixed rate rose to 6.3% for the week ending September 25, up from 6.26% the week before. The 15-year rate also reached 5.49% from 5.41%.

Meanwhile, Fannie Mae’s Economic and Strategic Research Group predicted that 30-year mortgage rates will fall to 6.4% by the end of 2025 and drop further to 5.9% by late 2026.

This article was originally published in www.mpamag.com