The Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI) showed mortgage application payments were flat in July compared with the month before. This index measures how new monthly mortgage payments vary across time.
While an increase is indicative of declining borrower affordability conditions, a decrease in the PAPI is indicative of improving borrower affordability. An increase occurs when the mortgage payment to income ratio (PIR) is higher because of increasing application loan amounts, rising mortgage rates, or a decrease in earnings. When loan application amounts decrease, mortgage rates decrease, or earnings increase, the PAPI goes down.
The national PAPI decreased 0.9 percent month-over-month, from 177.2 in June to 175.6 in July. This is still elevated compared with past years. Median earnings were up 3.7 percent year-over-year, while payments increased 17.2 percent over the same period, resulting in the PAPI being up 13 percent on an annual basis.
“Prospective homebuyers continued to face challenging conditions in July, with elevated and volatile mortgage rates and low housing inventory serving as a formidable one-two punch that suppressed mortgage applications and sales activity,” Edward Seiler, MBA Associate vice president, housing economics, and executive director for Research Institute for Housing America, said in a release. “With mortgage rates currently above 7 percent and expected to remain above 6 percent by the end of the year, affordability will remain a hurdle for many households looking to buy a home.”
The states with the highest PAPI were Idaho (258.7), Nevada (258.1), Arizona (237.0), California (234.0), and Florida (224.1). The ones with the lowest were Connecticut (121.0), Louisiana (125.3), Alaska (128.4), West Virginia (131.2), and New York (136.9).
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