Have homebuyer affordability conditions improved?

MBA report reveals the reality of the housing market for prospective buyers

Have homebuyer affordability conditions improved?

Homebuyer affordability conditions deteriorated again in April, according to new data from the Mortgage Bankers Association (MBA).

The path to homeownership became even rockier last month as mortgage rates remained stubbornly above 7%, driving up monthly payments and sidelining prospective buyers.

MBA's Purchase Applications Payment Index (PAPI), which tracks how new monthly mortgage payments vary relative to income, showed the national median payment applied for by homebuyers rose to $2,256 in April from $2,201 in March.

“In addition to lower mortgage rates, more housing inventory is desperately needed in markets throughout the country this summer to alleviate these tough affordability conditions,” said Edward Seiler, associate vice president of housing economics at MBA and executive director of Research Institute for Housing America.  

The national PAPI rose 1.5% month-over-month to 176.8 in April. An increase in the PAPI indicates a higher mortgage payment-to-income ratio due to factors like rising loan amounts, higher rates or stagnant earnings.

While mortgage payments were up 6.8% annually, strong earnings growth of 4.6% year-over-year meant the overall PAPI increased a more modest 2.1% from April 2023 levels.

For borrowers applying for loans in the 25th percentile for payment size, the median mortgage payment climbed to $1,537 in April from $1,488 the prior month.

The median payment on new home purchase loans measured by MBA's Builder Application Survey Index also increased, rising to $2,604 in April from $2,556 in March.

Read more: Should homebuyers wait for rates to fall or make a move now?

Deteriorating payment-to-rent ratios signaled that mortgage payments are outpacing rental costs as well. MBA's mortgage payment-to-rent ratio rose to 1.50 in Q1 2024 from 1.40 in Q4 2023 as the national median asking rent edged up slightly to $1,469.

Housing affordability worsened across racial groups in April, with Black, Hispanic and White households all seeing increases in their respective PAPI measures.

The states with the highest PAPI readings and least affordable conditions were Idaho, Nevada, Arizona, Florida and Rhode Island. The most affordable states based on the PAPI were Alaska, Louisiana, Connecticut, New York and Washington DC.

Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.