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The dollar value of mortgages home buyers are taking out is soaring as they try to afford higher home prices.
The average amount for a mortgage averaged $410,000 last week, according to data from the Mortgage Bankers Association. That marks the highest average mortgage amount since May.
“With home price appreciation continuing to run hot, increasing more than 19% annually in July, applications for larger loan amounts continue to outpace lower-balance loans,” says Joel Kan, the MBA’s associate vice president of economic and industry forecasting.
While home prices continue to rise, they are inching up by smaller annual gains than they have been. The National Association of REALTORS® reported a 14.9% annual gain in home prices for August’s existing-home sales.
Also, more housing inventory is coming onto the market. Nearly one-third of the 50 largest metros saw increases in the number of newly listed homes compared to last year, according to a new report from realtor.com®. That said, there are still fewer homes for sale than a year ago.
As buyers face higher home prices, they’ll need to set a budget and stick to it as they continue to face competition for homes. Most financial experts recommend homeowners limit their spending to 30% of their take-home pay for housing. That 30% also considers additional expenses of homeownership, like property taxes, homeowners insurance, private mortgage insurance (if applicable), and homeowners association fees.