Homebuyer Affordability Improves as Purchasing Power Grows

In July, homebuyer affordability improved as the national median mortgage payment dropped to $2,127 from $2,172 in June. This marks the second straight month of relief for buyers, supported by lower mortgage rates and steady income growth.

The Mortgage Bankers Association’s Purchase Applications Payment Index (PAPI) showed affordability gains as payments fell compared to income. A lower PAPI means buyers spend less of their earnings on mortgages, highlighting stronger purchasing power.

Key findings included a $45 monthly drop in payments since June and a slight decrease compared to last year. FHA and conventional loan applicants both saw declines, while regional differences remained—Nevada, Idaho, and Arizona faced the highest costs, while Louisiana, D.C., and New York were among the most affordable.

Affordability also improved across demographics, with Black, Hispanic, and White households all seeing reductions in their PAPI. Nationally, the index fell 3% month-over-month and over 4% year-over-year as income growth outpaced mortgage costs.

Lower-payment mortgages became more accessible, with the 25th percentile payment dropping to $1,468. Compared with rentals, buying a home is now nearly equal in cost in some markets, making ownership more achievable for first-time buyers.

New-construction purchases also saw relief, as the Builders’ PAPI showed median payments falling to $2,233. This suggests affordability gains are reaching both resale and new housing markets.

Looking ahead, experts expect modest improvements if income growth continues and home prices remain stable. However, affordability challenges persist, especially for first-time buyers in competitive regions.

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