Did mortgage payments just get a little lower for new homebuyers?
by Lisa Riley Roche deseret news · KSL.comEstimated read time: 2-3 minutes
KEY TAKEAWAYS
- Mortgage payments for new applicants fell $13 to $2,162 in Aug. from July.
- Affordability improved as earnings growth outpaced mortgage payment increases, despite higher rates.
- Mortgage rates may reach 8% by year-end amid economic uncertainty and global conflicts.
SALT LAKE CITY — Americans applying for mortgages in August saw a slight decrease in the size of a typical monthly payment from the previous month, a new analysis from the Mortgage Bankers Association shows.
The national median payment applied for by new mortgage applicants dropped $13 to $2,162 in August, from $2,175 in July, according to the analysis based on weekly survey data collected by the association.
That payment, however, was up by $62 from a year ago, a 2.9% increase. Still, the association said the monthly decline means that "affordability improved modestly" last month for homebuyers across the country.
The slight improvement comes "as a decline in the median purchase loan amount helped offset the impact of higher mortgage rates," Edward Seiler, associate vice president of housing economics for the association, said in a post.
"Affordability also improved compared to a year ago as earnings growth outpaced the increase in mortgage payments," said Seiler, who is also executive director of the Research Institute for Housing America.
Even so, "conditions remain challenging," he said. "Looking ahead, meaningful and sustained improvements in affordability will depend on a combination of lower mortgage rates, continued income growth, and moderating home-price growth."
Mortgage rates are continuing to climb amid the economic impacts of the war against Iran. At Mortgage News Daily, the daily index shot up 0.07 percentage points Monday to 7.5% for a 30-year fixed-rate mortgage, the highest level in nearly three years.
Now, there are questions about whether mortgage rates will hit 8% by the end of the year.
"Mortgage rates of 8% are not an impossibility," Lisa Sturtevant, chief economist at Bright MLS, recently told MarketWatch, according to a Realtor.com report that concluded reaching that rate was "possible but not probable," citing her and other experts.
"A lot depends on the conflict in the Middle East, inflation and ongoing economic uncertainty," Sturtevant said. "But for now, I'm thinking it's most likely that rates will stay in the 7% to 7.5% range this fall."
The Mortgage Bankers Association also measures affordability by comparing new homebuyer principal and interest payments to income over time. The association's "Purchase Applications Payment Index" went down just over 1% on an annual basis.
The drop represents an uptick in affordability nationwide due to conditions for borrowers improving. That can be loan application amounts decreasing, mortgage rates falling or earnings going up. In August, payments were up over last year but earnings rose even more, 4.1%.
Just over half of the states saw affordability decline last month under the measure, with Idaho, Nevada, Rhode Island, Arizona and Tennessee posting the highest index numbers, and Washington, D.C., Louisiana, West Virginia, Connecticut and New York, the lowest.
The Key Takeaways for this article were generated with the assistance of large language models and reviewed by our editorial team. The article, itself, is solely human-written.