Housing payments just hit a 2024 low

A confluence of economic events helped push median housing payments to a 2024 low in August, according to the Mortgage Bankers Association. 

The median payment recorded on new mortgage applications fell to $2,057 in August, the lowest since December 2023, when it was $2,055, according to the industry trade group. The August number decreased 3.9% from $2,140 one month earlier and 5.2% from $2,170 a year ago.

Data comes from the association's Purchase Applications Payment Index, which measures home buyer affordability based on various economic factors. August's PAPI reading came in at 160.7, also down 3.9% from July's score of 167.2. A lower reading indicates more affordability.

"Homebuyer affordability conditions improved for the fourth consecutive month, with lower mortgage rates, rising incomes and slower home-price growth giving prospective buyers' budgets a much-needed boost," said Edward Seiler, MBA associate vice president, housing economics, and executive director at Research Institute for Housing America. 

While payment sizes were down, consumers also saw wages go up over the past 12 months to bring the PAPI down by a faster 8.2% pace year-over-year. 

Research data from several sources consistently showed interest rates trending south over the summer, alongside a slower pace of home price growth in the past several months.

"MBA expects that lower mortgage rates, coupled with increasing housing inventory, will entice additional homebuyers to enter the housing market," Seiler said.

While the developments are welcome news to beleaguered lenders, other housing researchers have sought to temper the high hopes in the industry. Although the optimistic view is that an influx of buyers will appear as rates move closer to their own magic numbers, lenders are also facing the fact that record-setting price growth of a few years ago brought housing costs to a level out of reach for many.

While August's amount represents the lowest mark this year, it still comes in far below levels of 2022 when median payments were under $1,900 for much of the year.  

Taking a different view from the MBA, Fannie Mae recently predicted sluggish sales to persist for the rest of 2024. The government-sponsored enterprise's latest home purchase sentiment index also found consumers buoyed by falling interest rates but still overwhelmingly consider the current environment a bad time to buy. 

Also, even though inventory is increasing in 2024, a segment of that growth is from "stale" listings failing to generate sufficient buyer demand. Earlier this week, Redfin reported 48% of U.S. for-sale had been sitting on the market for 60 days or more last month, the highest share since 2019. 

The improving direction of housing affordability and the expectation of rate stability should at  least bring some certainty to help lenders plan for the following year. MBA's payments data showed widespread decreases in amounts across different loan and construction types.

For new single-family constructions, the median payment amount fell 3.7% to $2,362 from $2,452 in July. 

While coming in lower, median payments on Federal Housing Administration-backed loans dropped at a more moderate pace compared to the overall number, with a 1.1% decrease to $1,817 from $1,838. 

On conventional loan applications, the rate of the median drop was 5.6%, with the amount falling to $2,056 from $2,180 in July. 

Although there were some shifts in their placements, the top three most and least affordable states were the same in July and August. Idaho, Nevada and Arizona ranked as the least affordable states with PAPI readings of 252.1, 247.3 and 217.1, respectively.

On the other end, borrowers saw the greatest affordability levels in Louisiana, Connecticut and New York, whose PAPI scores came in at 115.3, 118 and 120.8.