MBA forecast calls for higher house prices and mortgage rates
According to the new MBA Purchase Request Payment Index (PAPI), homebuyer affordability declined in March, with the national median payment requested by applicants rising 5% to $1,736 from $1,653 in february.
An increase in the MBA’s PAPI – indicative of declining borrower affordability conditions – means that the mortgage payment-to-income (PIR) ratio is higher due to higher demand loan amounts, higher mortgage rates or a drop in income. A decrease in PAPI occurs when loan application amounts decrease, mortgage rates decrease, or income increases.
“The start of spring homebuying season is off to a mixed start,” said Edward Seiler, associate vice president of MBA housing economics and executive director of the Research Institute for Housing America. country in March, but rapid growth in house prices and a 42 basis point rise in mortgage rates last month dampened buyer demand activity. A typical borrower’s principal and interest payment was $387 more than in March 2021. Rapid price appreciation, skyrocketing inflation, low inventory levels and mortgage rates now two percentage points higher to those of last year are all headwinds for the housing market in the months ahead. – especially for first-time buyers.
The national PAPI rose 5% to 150.9 in March from 143.7 in February, meaning payments on new mortgages represent a larger share of the typical consumer’s income. Compared to March 2021, the index jumped almost 23% and the national mortgage payment rose 3.2% to $1,129 from $1,094 in February.
MBA’s national mortgage payment to rent ratio (MPRR) rose to 1.38 in March – the highest level since 2010 – from 1.32 in February, 1.22 in January and 1.15 in December 2021 ; meaning that mortgage payments for home purchases have increased relative to rents. The national median asking rent in the first quarter of 2022 increased 4% on a quarterly basis to $1,255. The ratio of the 25th percentile mortgage application payment to median asking rent was 0.90 in March, down from 0.87 in February and 0.74 in December 2021.
“MBA’s updated forecast calls for a year-over-year decline in existing sales, higher home prices and mortgage rates, and a smaller but solid 4% gain in purchase volume,” Seiler said.
Key findings from the MBA Purchase Requisition Payout Index – March 2022:
- The national median mortgage payment requested by applicants was $1,736 in March, compared to $1,653 in February, $1,526 in January and $1,349 in March 2021.
- The national median mortgage payment for FHA loan applicants was $1,254 in March, down from $1,201 in February and $1,018 in March 2021.
- The national median mortgage payment for conventional loan seekers was $1,819 in March, down from $1,750 in February and $1,424 in March 2021.
- The top five states with the highest PAPI were: Idaho (241.2), Nevada (223.9), Arizona (200.7), California (192.5) and Utah ( 190.9).
- The top five states with the lowest PAPI were: Washington, DC (89.1), Alaska (98.1), Connecticut (98.4), West Virginia (106.8), and Louisiana (107.1) .
- Homebuyer affordability declined for black households, with the national PAPI falling from 146.5 in February to 153.8 in March.
- Homebuyer affordability declined for Hispanic households, with the national PAPI falling from 137.5 in February to 144.4 in March.
- Homebuyer affordability declined for white households, with the national PAPI falling from 144.4 in February to 151.6 in March.
To read the full report, including charts and methodology, click here.