“Housing affordability conditions improved for the seventh consecutive month to close out 2025 because of lower mortgage rates and steady household earnings growth,” said Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America.
“MBA expects that moderating home-price appreciation, combined with even lower mortgage rates, will continue to gradually ease affordability constraints and support increased housing market activity.”
MBA’s national PAPI declined 0.5% in December to a reading of 148.8, down from 149.5 in November, a signal of improved affordability. While mortgage payments fell 4.8% from a year earlier, earnings growth of 2.9% contributed to a 7.5% annual improvement in affordability, the association said.
For borrowers at the lower end of the payment spectrum, the national mortgage payment at the 25th percentile increased slightly to $1,413 in December, up from $1,409 in November.
The Builders’ Purchase Application Payment Index, which focuses on newly built single-family homes, showed the median mortgage payment rose to $2,173 in December, up from $2,157 in November.
On an annual basis, the national median mortgage payment was down $102, or 4.8%, from December 2024. Payments for Federal Housing Administration (FHA) loan applicants rose to $1,802 in December (compared to $1,776 in November) but remained below the $1,866 level recorded a year earlier. Conventional loan applicants saw a median payment of $2,036, down from $2,063 in November and $2,128 in December 2024.
Affordability improved across racial and ethnic groups, according to the MBA. The PAPI reading for Black households fell to 153.8 in December, down from 154.5 in November, while the index for Hispanic households declined from 141.8 to 141.1 during the month. The PAPI for White households decreased from 151.2 to 150.5.
By state, Nevada recorded the highest PAPI in December at 235.8, followed by Idaho, Arizona, Rhode Island and Florida. The lowest PAPI readings were reported in Louisiana, Vermont, Washington, D.C., Connecticut and New York.
MBA’s PAPI measures how new mortgage payments change over time relative to income. Higher index values indicate higher payment-to-income ratios, reflecting reduced affordability, while lower values signal improving affordability.
The index uses mortgage application data and U.S. Bureau of Labor Statistics earnings data. It is not seasonally adjusted.