HousingWireHousingWire
Homebuyers faced worsening affordability conditions in January as the median monthly mortgage payment for purchase applicants increased to $2,205, a 3.7% jump from December’s $2,127, according to the Mortgage Bankers Association (MBA).
The findings, drawn from MBA’s Purchase Applications Payment Index (PAPI), reflect the growing strain on borrowers amid persistent high home prices and fluctuating mortgage rates.
“Homebuyer affordability conditions declined further in January as volatile mortgage rates and high home prices continue to impact many prospective buyers’ purchasing power,” said Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “Even with persisting affordability challenges, MBA is forecasting for a small increase in purchase originations in 2025, with activity increasing 16% to $2.1 trillion.”
Affordability declines across most states
The PAPI index, which measures mortgage payments relative to income, climbed 3.1% in January to 165.9, indicating a further squeeze on affordability. Mortgage rates rose by 18 basis points from December and 24 basis points compared to January 2024, contributing to the increase. Meanwhile, the median loan application amount grew from $319,000 in December to $324,800 in January.
Declining affordability was widespread, with 40 states experiencing an increase in PAPI. The highest PAPI levels were recorded in:
- Idaho (261.8)
- Nevada (254.3)
- Arizona (218.7)
- Florida (208.9)
- Rhode Island (205.9)
Meanwhile, the states with the lowest PAPI – indicating better affordability – were:
- Louisiana (114.6)
- Connecticut (123.8)
- Alaska (125.9)
- Washington, D.C. (129.2)
- Wyoming (132.5)
Higher payments across loan types
Borrowers across different mortgage programs also saw their payments rise. FHA loan applicants faced a median monthly payment of $1,934, up from $1,866 in December. Conventional loan applicants saw their median payment increase to $2,225, up from $2,128.
The Builders’ Purchase Application Payment Index, which tracks new-home purchases, showed the median mortgage payment rising to $2,531, up from $2,500 in December.
Mortgage costs outpacing rent
MBA’s Mortgage Payment to Rent Ratio, which compares mortgage costs to rental payments, also rose, reflecting a growing gap between homeownership and renting. The ratio increased from 1.34 in September to 1.44 in December, signaling that mortgage payments have risen at a faster pace than rental costs.
The Census Bureau’s national median asking rent fell slightly to $1,475 in the fourth quarter of 2024, down from $1,523 in the previous quarter. However, mortgage payments for lower-income borrowers (25th percentile) increased to $1,519 in January from $1,456 in December.
Affordability declines for multiple demographics
Housing affordability worsened for all racial and ethnic groups in January.
- Black households: PAPI increased from 152.2 in December to 157.0 in January.
- Hispanic households: PAPI climbed from 153.6 to 158.5 over the same period.
- White households: PAPI rose from 163.8 to 168.9.
