Buyers continue to feel the pinch from high mortgage rates and still-elevated home prices. But those committed to buying a new home are really committed, LOs said.
The national median payment applied for purchase applicants rose 4.9% to $2,061 in February from $1,964 in the previous month, according to the Mortgage Bankers Association‘s (MBA’s) purchase applications payment index (PAPI), which measures how new monthly mortgage payments vary across time – relative to income.
An increase in MBA’s PAPI – indicative of declining 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.
“Many prospective homebuyers continue to feel this affordability squeeze, with the typical purchase application loan amount increasing $8,003 over the month to $320,003,” Edward Seiler, MBA’s associate vice president of housing economics.
The national median mortgage payment was $2,061 in February, up from $1,964 in January and from $1,920 in December. It is up $408 from one year ago, equal to a 24.7% increase, according to PAPI.
Median mortgage payment for conventional loan applicants was $2,117, up from $2,009 in January and from $1,750 in February 2022.
While high interest rates and home prices drove up mortgage payments and application payments, loan officers are seeing bidding wars due to a lack of inventory issues.
There are fewer leads from a year ago but the number of pre-approvals is about the same, Hunter Marckwardt, top loan officer and executive vice president of CrossCountry Mortgage, said in an interview.
“You have less people but they are more committed,” Marckwardt said. “I think the reality is that interest rates are higher, so the immediate reaction of fear has subsided.”
Given ongoing economic uncertainty and the likelihood of a recession, the MBA expects mortgage rates to decline as this year progresses, which will help affordability, Seiler said.
The MBA projects the 30-year fixed rate mortgage to drop to an average of 5.3% this year from 6.6% in 2022. In 2024, rates are expected to drop to 4.6% in 2024 and 4.4% in 2025.