Despite increasing home prices, homebuyer affordability improved in October on the back of year-low mortgage rates, the Mortgage Bankers Association said.

The national median payment for purchase applicants fell nearly $30 to $2,039 last month compared to September, according to the MBA’s Purchase Applications Payment Index. That’s down $88 from a year ago and $61 two months prior.

“Affordability conditions have now improved for the fifth consecutive month because of lower mortgage rates, higher household earnings, and flattening home-price growth,” said Edward Seiler, MBA’s Associate Vice President of Housing Economics and Executive Director of the Research Institute for Housing America, in a press release Thursday. 

“Affordability is improving — [the index] is at its lowest level since March 2022 — and is likely to continue to as mortgage rates hold to around 6 percent and more supply comes onto the market,” he added.

The index declined 1.6% to 152 last month and 5.5% on a yearly basis, as earnings grew and payments dropped 4.2%. A decrease results from falling loan application amounts, lower mortgage rates or increased earnings. 

For borrowers applying for lower-payment mortgages, the national mortgage payment decreased to $1,402 in October from $1,418 the month prior. 

Affordability also improved in white, Black and Hispanic households from September to October, with the index dropping 1.8%, 1.9% and 1.9%, respectively. Hispanic households were the most affordable with a 141.6 score on the index, followed by Black households at 151.5 and then White households at 153.1.

The two least affordable states reside in the West, with Idaho and Nevada each accumulating scores more than 230. Rhode Island, Arizona and Tennessee came next, with scores of 199.4, 198.6 and 192.8, respectively.

Louisiana was the most affordable state with a score of 113.5. Connecticut (116.2), Washington D.C. (118.6), Hawaii (123.6) and North Dakota (124.9) rounded out the top five.

While affordability may be improving, homebuying activity is stuck at below-normal levels, as many potential buyers remain on the sidelines due to high prices and economic uncertainty, said Asad Khan, Redfin senior economist.