- New homebuyers face the most affordable market ever, according to data from the Mortgage Bankers Association.
- The group’s purchase requisition payment index hit a record high, indicating a decline in affordability.
- “For new home buyers, this is the worst situation since the end of the Great Recession.”
Americans looking for a new home are facing the most affordable housing market ever, according to data from the Mortgage Bankers Association.
The group’s Purchase Application Payment Index (PAPI) rose 0.5% in April to a record high of 172.3. A higher measurement indicates less affordability for borrowers due to higher loan amounts, higher mortgage rates, or lower income.
“This hits a new record because not only is interest not receding from the high 6%, but the general application volume is 10%,” Edward Seiler, associate vice president of housing economics at the MBA, told Insider. has jumped faster than income growth,” he said.
Meanwhile, the median national mortgage payment was $2,112 in April, up from $2,093 the previous month, according to MBA data.
The highest PAPI gauge readings were in Idaho (255.6), Nevada (246.3), Arizona (226.1), Florida (216.6), and California (213.9).
When the Federal Reserve starts raising rates in 2022, 30-year fixed mortgage rates have more than doubled, from 3% to over 7%.
At the moment, mortgage rates are hovering at just under 7% as the Fed hikes rates 10 times in a row and its June meeting is looming.
“For new homebuyers, this is the worst situation since the end of the Great Recession,” Seiler said. “Current homeowners who have been lucky enough to get a 2.75% interest rate in 2022 are in a great position, but new homebuyers looking to buy a home for the first time and those looking to move to another home are in a better position. For those who are, this is a very difficult proposition.”
He expects mortgage rates to return to the 5% range as inventory pressure eases, but when that happens will depend on how the central bank adjusts policy in the coming months. .
Sailer said demographics will eventually change as the time comes for millennials looking for their first homes to replace baby boomers who have owned properties for decades. He explained that it would affect the easing of inventories.
“We expect inventories to have bottomed out, but things will steadily improve over the next few years,” he said.
The MBA’s findings on affordability are reflected in Wednesday’s Goldman Sachs report, which found there are only four affordable cities in the current housing market.
Of the 25 largest cities, only St. Louis, Detroit, Chicago and Baltimore are considered “affordable,” according to the Goldman House Price Index. In these four largest cities, he said, monthly payments on new mortgages are less than 25% of monthly household income.
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