Affordability Hits New Low In Top States As Mortgage Payments Surge

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Homebuyer affordability hit again in April 2024, as the national median payment for purchase applicants rose from $2,201 in March to $2,256.

According to Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI) data — which tracks changes in monthly mortgage payments relative to income — the states with the highest PAPI were Idaho (267.2), Nevada (264.9), Arizona (236.4), Florida (227.4), and Rhode Island (224.8).

The increase indicates worsening affordability conditions, with mortgage rates above 7%, deterring many potential buyers from the housing market.

Real estate giant Grant Cardone pointed to the issue earlier this month, saying on X, formerly Twitter, that escalating mortgage rates and high home prices are pushing more people towards renting rather than buying. 

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“Interest rates on financing the ‘American dream’ are now more than 7.5%,” Cardone said, adding that the average monthly payment for a typical $417,000 mortgage exceeds the national average rent by roughly 60%.

He pointed out that the current environment is steering the country towards becoming a ‘nation of renters’ as more people find homeownership out of reach.

Nationally, the PAPI climbed 1.5% to 176.8 in April, with median earnings up 4.6% compared to the previous year. Despite that earnings growth, mortgage payments jumped 6.8%, marking a 2.1% year-over-year rise in the PAPI.

For those seeking lower mortgage payments, the national median mortgage payment increased from $1,488 in March to $1,537 in April 2024.

The Builders' Purchase Application Payment Index (BPAPI) indicated that the median mortgage payment for purchase mortgages from MBA's Builder Application Survey increased from $2,556 in March to $2,604 in April.

Idaho, with the highest PAPI, faces the worst affordability challenges. The state’s score of 267.2 points to a strain on homebuyers’ budgets due to high mortgage rates and rising home prices.

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Arizona, with a score of 236.4, also has high mortgage payment burdens. The state's growing population and housing demand continue to push property prices up, making it harder for buyers to find affordable options.

According to the MBA, limited housing inventory and high demand in Rhode Island, a smaller state with a score of 224.8, have driven up mortgage payments relative to income.

On the other hand, some states have lower affordability issues. With one of the lowest scores at 131.6, Alaska remains more affordable than other regions. Louisiana (134.1) and Connecticut (134.2) also benefit from relatively lower mortgage payment burdens, making homeownership more accessible.

With a PAPI of 139.1, New York presents a more mixed picture. While the state’s affordability is better than many others, major metros like New York City still struggle with high housing costs.

Rising mortgage payments relative to rent further highlight a growing affordability problem.

The MBA's national mortgage payment to rent ratio (MPRR) increased from 1.40 at the end of the fourth quarter to 1.50 at the end of the first quarter, marking an environment where mortgage payments for home purchases are rising faster than rents.

High mortgage rates, soaring home prices, and increasing mortgage payments relative to income continue to erode affordability, making homeownership more difficult for many Americans.

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