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Home buyer affordability declined in August, reflecting the continued impact of mortgage rates that remain above 7%, according to the Mortgage Bankers Association (MBA).

According to the MBA, the national median payment applied for by purchase applicants increased to $2,170 in August from $2,162 in July.

The MBA Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time relative to income, increased 0.4% to 175.4 in August. An increase in the PAPI is indicative of declining borrower affordability conditions, reflecting a higher mortgage payment to income ratio. The PAPI is only two points lower than its record reading in May 2023.

“Prospective home buyers’ budgets continue to be impacted by the combination of high home prices and mortgage rates that remain higher than 7%,” says Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “If mortgage rates shift lower in 2024 as we anticipate, the combination of rising inventory levels and lower rates should lead to stronger demand for buying a home.”

Median earnings increased 4.2% on a year-over-year basis while payments have increased by 18%; as a result, the PAPI is up 13.2% on an annual basis, according to the MBA.

For borrowers applying for lower-payment mortgages—in the 25th percentile—the national mortgage payment decreased to $1,444 in August from $1,451 in July. The national median mortgage payment for FHA loan applications was at a record-high level of $1,909 in August, up from $1,469 in the same month of 2022.

The Builders’ Purchase Application Payment Index (BPAPI) showed the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased to $2,609 from $2,526 on a month-over-month basis in August.

The five states with the highest PAPI were Idaho, Nevada, Arizona, Florida, and California; the states with the lowest PAPI were Alaska, Connecticut, Washington, D.C., Vermont, and West Virginia.