MBA Says Homebuyer Affordability Taking an Enormous Hit
A 30-year fixed rate mortgage has reached 7.16%– the highest rate since 2001.
Homebuyer affordability took an enormous hit in September, according to the latest data from the Mortgage Bankers Association (MBA).
MBA reported this week that mortgage rates leaped for the 10th consecutive week with the 30-year fixed rate touching 7.16 percent – the highest rate since 2001.
Meanwhile, homebuyer affordability dropped in September, as the national median payment applied for by applicants increased 5.5 percent to $1,941 from $1,839 in August, according to MBA’s Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey (WAS).
Median Monthly Payments Up 40% on the Year
This translates to the typical homebuyer’s monthly payment rising $102 from August, according to MBA.
It is up by $558 in the first nine months of the year – a 40.4% increase.
Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America, said in prepared remarks, “With mortgage rates continuing to rise, the purchasing power of borrowers is shrinking. The median loan amount in September was $305,550 – much lower than the February peak of $340,000.”
Added Seiler, “MBA expects supply and affordability constraints and economic uncertainty to continue to hamper the purchase market. Purchase origination volume is forecast to decrease 3.3 percent next year to $1.53 trillion.”
The national median mortgage payment was $1,941 in September, up from $1,839 in August and from $1,844 in July.
The top five states with the highest PAPI were: Nevada (264.4), Idaho (257.0), Arizona (238.5), Utah (217.0), and Florida (210.7).
Refinance Applications ‘Unchanged’
Joel Kan, MBA’s vice president and deputy chief economist, said in prepared remarks that refinance applications were essentially unchanged, “but purchase applications declined 2 percent to the slowest pace since 2015 – over 40 percent behind last year’s pace.”
Despite higher rates and lower overall application activity, MBA reported that there was a slight increase in FHA purchase applications, as FHA rates remained lower than conventional loan rates.”
Added Kan, “MBA’s forecast expects both economic and housing market weakness in 2023 to drive a 3 percent decline in purchase originations, while refinance volume is anticipated to decline by 24 percent.”