July affordability bump signals purchase surge window

Homebuyers were able to take advantage of slowing home price gains in July, as lower median loan amounts countered a rise in mortgage rates, the Mortgage Bankers Association said.

Its Purchase Applications Payment Index fell to $2,175 from $2,191 in June. But this is still higher than last July's $2,127.

After bottoming out at $2,025 for December, the PAPI rose in four of the next five months, peaking at $2,198 in May.

The S&P Cotality Case-Shiller price index just released its June data, with the national index reporting a 1.5% gain in annual price growth, with a 0.1% month-to-month seasonally adjusted increase; the unadjusted gain was 0.4%.

On the same day, the Federal Housing Finance Agency released its House Price Index, which showed a 0.3% quarterly rise, and a 2.1% annual increase in the second quarter.

"June's numbers show a housing market that is finding its footing, though progress remains slow," said Thomas Malone, principal economist at Cotality.

"Annual appreciation accelerated across most major metros, suggesting the market is moving in the right direction despite an uneven recovery," Malone continued. "Buyers and sellers can approach the second half of the year with cautious optimism, but this remains a steady climb rather than a rapid rebound."

Rates are one of the factors used by the MBA to calculate the PAPI. Its Weekly Application Survey had the conforming 30-year fixed rate mortgage bottoming out at the end of February at 6.09%; during the same period, the Freddie Mac Primary Mortgage Market Survey had the 30-year at 5.98%.

No matter whose rate data is being looked at, nearly six months' later rates are substantially higher. The latest WAS release put the conforming 30-year at 6.78%; the Freddie Mac data released earlier today was at 6.66%.

"Even though the monthly payment is $48 higher than a year ago, it actually is an improvement in affordability because earnings growth outpaces the rise in what consumers are spending on their mortgage," said Edward Seiler, the MBA's associate vice president of housing economics and executive director of the Research Institute for Housing America, in a press release.

"Looking ahead, we expect affordability conditions to remain closely tied to the path of mortgage rates and home-price growth," Seiler continued. "Mortgage rates have increased in recent weeks, but any sustained reversal, combined with moderating home-price growth and rising inventory, would provide additional relief for prospective buyers through the remainder of 2026."

The MBA's' August forecast calls for purchase volume of $1.43 trillion this year. This is a slight improvement over the July forecast, but on a weaker refinance picture due to higher mortgage rates, the total volume outlook was reduced to $2.147 trillion from $2.163 trillion in July.

Fannie Mae's latest expects nearly $2.17 trillion this year, versus the prior outlook of almost $2.3 trillion.

The MBA also calculated the PAPI as an index value. On a national basis, it decreased by 1.3% during the month to 155.8 in July from 157.5 in June. While payments were 2.2% higher versus July 2025, earnings growth was 3.6% lower, for a 1.3% improvement in affordability on an annual basis.

By loan type, conventional median purchase payments were $2,184, down from $2,209 in June and up from $2,160 in July 2025.

For Federal Housing Administration-insured home purchase mortgage applicants, the median was $1,901 for July, compared with $1,872 in June and $1,865 a year ago.