Despite persistently high mortgage rates, home buyer affordability remained challenged but mostly unchanged in July compared with the previous month. According to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time, the national median payment applied for by purchase applicants remained at $2,162 in July.

The national PAPI decreased 0.9% to 175.6 in July on a month-over-month basis. A decrease in the index is indicative of improved borrower affordability conditions. However, despite the decrease, the PAPI remains at elevated levels. Median earnings are up 3.7% on a year-over-year basis, while payments increased 17.2% year over year.

For borrowers applying for lower-payment mortgages—the 25th percentile—the national mortgage payment decreased to $1,451 in July from $1,459 in June. The national median mortgage payment for FHA loan applicants increased month over month, while the median mortgage payment for conventional loan applicants decreased in July compared with June.

The top five states with the highest PAPI were Idaho, Nevada, Arizona, California, and Florida; the five states with the lowest PAPI were Connecticut, Louisiana, Alaska, West Virginia, and New York.

“Prospective home buyers continued to face challenging conditions in July, with elevated and volatile mortgage rates and low housing inventory serving as a formidable one-two punch that suppressed mortgage applications and sales activity,” says Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “With mortgage rates currently above 7% and expected to remain above 6% by the end of the year, affordability will remain a hurdle for many households looking to buy a home.”

Recent releases from the Freddie Mac Primary Mortgage Market Survey suggest affordability conditions likely will remain challenged through August. Thirty-year fixed-rate mortgages have continued to climb, reaching an average of 7.23% for the week of Aug. 24, the highest level since 2001.

“Indications of ongoing economic strength will likely keep upward pressure on rates in the short term,” says Sam Khater, Freddie Mac’s chief economist. “As rates remain high and supply of unsold homes woefully low, incoming data shows that existing-home sales continue to fall.”

Khater notes that the availability of new homes and rising rate of new-home sales is “helping provide modest relief to the unyielding housing inventory predicament.”

Cost of Buying vs. Renting

The MBA’s Builders’ Purchase Application Payment Index (BPAPI) showed the median mortgage payment for purchase mortgages from the Builder Application Survey increased to $2,526 in July from $2,520 in June.

The association’s national mortgage payment to rent ratio increased to 1.50 at the end of the second quarter from 1.43 at the end of the first quarter. The increase indicates mortgage payments for home purchases have increased relative to rents on a sequential basis. The Census Bureau’s Housing Vacancies Survey national median asking rent decreased 1.2% sequentially to $1,445 in the second quarter. The 25th percentile mortgage application payment to median asking rent ratio increased to 1.00 in the second quarter from 0.96 in the first quarter.