Median monthly payment on a new mortgage drops

Home buyers saw some affordability relief last month, with new monthly payments decreasing close to levels last seen in mid 2023, according to the Mortgage Bankers Association.  

The median payment on new purchase mortgages dropped 2.4% to $2,167 in June compared to $2,219 one month prior. The latest decline puts the number nearly on par with last summer, when it landed at $2,162 for both June and July. The monthly payment trended downward again after consistently rising enroute to a 2024 high in April. It currently sits at its lowest point since December.

"Home buyer affordability conditions improved for the second straight month as declining mortgage rates continue to increase purchasing power and entice some borrowers back into the housing market," said Edward Seiler, MBA's associate vice president, housing economics, and executive director of Research Institute for Housing America, in a press release. 

The average 30-year interest rate dropped by more than 30 basis points from early May to late June, according to Freddie Mac's weekly measure. Despite the ongoing descent, monthly payments this summer are still running higher on a recent historical basis due to continued price growth. Rates also still stand more than two times higher from where they began in early 2022. During that year, the median mortgage payment ranged from approximately $1,500 to $2,000, MBA's data showed.

Affordability is gradually improving this summer for reasons other than rates. The MBA's Purchase Applications Payment Index registered a similar 2.4% decrease from May, but fell 3.6% year over year. While the median monthly payment remained close to summer 2023 levels, wage growth increased, leading to greater affordability. 

The trade group's PAPI tracks affordability based on a payment-to-income ratio that factors in loan balances, rates and wages, with a lower reading indicative of increased affordability. June's PAPI score came in at 170.9, down from 175 in May and 177.2 a year earlier. 

"The median loan application amount fell to $320,512 in June, indicating that home-price growth is moderating, which should boost additional activity," Seiler noted.

Affordability showed improvement across demographics and borrowing types, but buyers of new single-family homes saw the median monthly payment decline by only a fraction to $2,510 from $2,522 month to month. 

Meanwhile, borrowers of Federal Housing Administration-sponsored loans often used by first-time buyers saw the median fall 0.9% from May to $1,907 from $1,924. The latest payment amount is still higher than the median of $1,854 in June 2023. 

Conventional mortgage borrowers saw more relief with their payment amount down 2.1% on a monthly basis to $2,180. One month earlier, the number clocked in at $2,226. The conventional median payment is also below $2,205 reported a year ago.

PAPI readings also decreased from May to June for Black, Hispanic and white households almost equally from 2.3% to 2.4% to marks of 171.4, 159.5 and 172.6.

The Western U.S., again tops the list when it comes to challenging affordability levels. The states with the highest PAPI scores last month were found mostly west of the Rockies, led by Nevada, Idaho and Arizona, which had readings of 259.4, 253.4 and 229.7, respectively. 

On the other end, the states with the most affordability were Louisiana at 122.9, West Virginia with a score of 124.2 and New York at 124.8.