Homebuyer Affordability Improved 7.5% in 2025 as Monthly Payments Dropped
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Monthly mortgage payments are easing across the U.S., with MBA’s December data showing a $102 year-over-year drop and the seventh straight improvement in affordability.
According to the Mortgage Bankers Association’s December 2025 Purchase Applications Payment Index (PAPI), the national median mortgage payment for homebuyers fell to $2,025, down from $2,034 in November.
As mortgage rates move lower and incomes keep rising, pressure on buyers is finally starting to ease after years of climbing housing costs.
For much of the past two years, higher rates pushed monthly payments sharply higher. The latest MBA data shows that trend steadily reversing.
Affordability improved again, and the numbers back it up
MBA’s PAPI tracks how new mortgage payments change compared with household income. When the index drops, affordability improves.
That’s exactly what happened again in December.
Here’s what shifted in the latest report:
The national PAPI fell to 148.8 in December from 149.5 in November, a 0.5% monthly decline
The median mortgage payment dropped $9 from November
Compared with December 2024, payments were down $102, a 4.8% annual decrease
Earnings growth of 2.9% helped push affordability up 7.5% year over year
MBA Associate Vice President of Housing Economics Edward Seiler connected the improvement to both rates and income trends.
“Housing affordability conditions improved for the seventh consecutive month to close out 2025 because of lower mortgage rates and steady household earnings growth. 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.”
Over the past several months, mortgage payments have come down while incomes have kept rising. Together, those shifts are easing the strain buyers felt when rates surged in 2022 and 2023.
What buyers are paying now depends on loan type
The national median payment shows the overall direction, but the experience looks different depending on how buyers finance their purchase.
MBA’s December breakdown shows:
The overall median mortgage payment for purchase applicants was $2,025
FHA borrowers paid a median of $1,802, up slightly from $1,776 in November but below $1,866 one year earlier
Conventional borrowers saw payments fall to $2,036 from $2,063 in November and $2,128 in December 2024
For buyers at the lower end of the payment range, changes were small. The 25th percentile payment moved up to $1,413 in December from $1,409 in November
New construction stood out as the highest-payment segment in the data. Builder purchase loans posted a median payment of $2,173, up from $2,157 in November
Across loan types, payments today are lower than they were a year ago, even with some month-to-month bumps along the way.
Affordability still varies sharply by state
MBA’s December PAPI readings showed a widespread across the country.
The states with the highest payment pressure:
Nevada at 235.8
Idaho at 232.5
Arizona at 197.6
Rhode Island at 193.3
Florida at 187.9
Meanwhile, several markets looked far more affordable:
Louisiana at 109.2
Vermont at 115.2
Washington, D.C. at 115.5
Connecticut at 116.2
New York at 119.5
There’s still a wide gap between the most and least affordable markets. In states like Nevada and Idaho, mortgage payments take up a much larger share of income, even as national affordability improves.
In lower-PAPI states, buyers are already seeing more breathing room.
Affordability gains showed up across household groups
The improvement wasn’t limited to one group of buyers. MBA’s data showed affordability moving in the right direction across major household categories.
Month-to-month changes included:
Black households saw PAPI drop from 154.5 to 153.8
Hispanic households saw the index fall from 141.8 to 141.1
White households saw PAPI decline from 151.2 to 150.5
Each group spent a slightly smaller share of income on mortgage payments in December than in November, evidence that easing affordability is showing up across the market.
What this trend signals heading into 2026
Seven straight months of improving affordability doesn’t mean housing is suddenly inexpensive. Monthly payments are still elevated compared with pre-pandemic levels, and many markets are stretched relative to local incomes.
What the MBA data does show is steady progress:
Mortgage payments are moving lower year over year.
Income growth is helping absorb what remains of the rate shock from 2022 and 2023.
Home-price appreciation is no longer accelerating at the same pace.
That mix tends to support more activity. As monthly costs stabilize and move down, buyers who were pushed to the sidelines start to come back.
Demand builds first in markets where affordability improves fastest.
MBA expects that trend to keep moving in the same direction. If rates ease further and price growth slows, affordability should keep improving into 2026, helping bring the housing market back toward balance.
Key Details:
MBA’s December 2025 Purchase Applications Payment Index (PAPI) shows the national median mortgage payment fell to $2,025, down $9 from November and $102 year over year, as the index declined to 148.8, marking a 7.5% annual improvement in affordability.
FHA payments rose slightly month over month to $1,802, while conventional payments fell to $2,036 from $2,063 in November.
Housing Market - February 2, 2026 - Sarah Lentz
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