MortgageOriginationReal Estate

Homebuyer affordability gets even tougher

Median mortgage application monthly payment rose 5% to $1,736 in March

A combination of home price appreciation, inflation, and low housing inventory continued to dent homebuyers’ ability to buy homes in March. The trend of a decrease in homebuyer affordability is forecast to persist in the coming months, hitting first-time buyers the most. 

The national median monthly mortgage payment settled in loan applications rose 5% to $1,736 in March from $1,653 the previous month, according to a survey published Thursday by the Mortgage Bankers Association

Conventional loans’ national median mortgage payment jumped 4% to $1,819 last month from $1,750 in February. FHA loans payment also rose 4.4% to $1,819 in March from $1,750 in the previous month. 

“The healthy labor market and robust wage gains fueled demand throughout the country in March, but rapid home-price growth and the 42-basis-point surge in mortgage rates last month slowed purchase application activity,” said Edward Seiler, MBA’s associate vice president for housing economics and executive director at the Research Institute for Housing America, in a statement.

The new “purchase applications payment index,” which measures how new monthly mortgage payments vary relative to income, increased 5% to 150.9 in March from 143.7 in February. An increase in MBA’s PAPI, indicative of worsening borrower affordability conditions, means that the mortgage payment to income ratio is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings. 

Black households’ homebuyer affordability dropped at the steepest rate with the index rising to 153.8 in March from 146.5 in February. White households’ index climbed to 151.6 last month from 144.4 from the previous month. For Hispanic households, it increased to 144.4 from 137.5 during the same period. 

How lenders can continue to serve borrowers despite housing affordability challenges

Potential borrowers who’ve been priced out of the housing market need to be able to compete with an increasingly growing share of cash buyers and investors who are beating them in bidding wars.

Presented by: Finance of America

Another trend from the survey is an increase in mortgage payments for home purchases relative to rents.

The national mortgage payment to rent ratio rose to 1.38 last month, the highest since 2010. The MPRR in February came in at 1.32 and 1.22 the previous month.

Purchase mortgage rates surpassed the 5% threshold earlier this month following its climb for the seventh consecutive week, according to Freddie Mac’s Primary Mortgage Market Survey. With mortgage rates following the 10-year Treasury yield, the upward trajectory is forecast to continue. 

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