This Was the Average Mortgage Taken Out in November. Can You Afford It?

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  • In November, the average amount borrowed to finance a home purchase was $414,114.
  • Home prices could stay high well into the new year.

The number might really shock you.

There's a reason so many people have struggled to buy a home this year. Home prices have soared on a national scale, fueled by limited supply and high buyer demand. In fact, homes have gotten so expensive that in November, the average purchase mortgage came to $414,114, reports the Mortgage Bankers Association.

Now to be clear, there's been a lot of activity at the higher end of the housing market (whereas there's been a notable shortage of starter homes). That could be skewing the average mortgage amount upward.

But still, for many buyers, a home loan anywhere close to $414,114 just isn't in the cards. And so the question is: Will homes become more affordable in the near term? Or will many buyers have to sit tight and wait things out?

What 2022 has in store for home prices

In the absence of a crystal ball, it's hard to say how home prices will trend over the next 12 months. But chances are, they won't drop substantially during the first half of the year, and possibly not during the second half.

For home prices to come down, we need more inventory. Otherwise, buyers will continue to have to outbid each other for the limited homes that are available, keeping prices high.

But buyers may not be so eager to list their homes. Soaring COVID-19 cases and the emergence of the highly transmissible omicron variant could keep hesitant sellers from putting their properties on the market.

Meanwhile, mortgage rates may climb a little in the course of 2022, but they're likely to remain competitive on a historical basis. That means buyer demand may not wane at all, creating a scenario where those struggling to afford a home today could remain in the same boat for months.

How to know how much house you can afford

As a general rule, your housing costs, including your mortgage payment, property taxes, insurance, and any other predictable recurring expenses, should not exceed 30% of your take-home pay. Based on today's home prices, more buyers risk surpassing that threshold. Unfortunately, doing so could mean struggling to keep up with your housing expenses or your bills in general.

Since home values could remain high in 2022, you may want to put your plans to buy on hold if today's prices are too much of a stretch for you. This especially holds true if you have a comfortable, flexible housing situation right now. If you're able to renew a lease at an affordable rate for the next year, for example, then it could pay to pause house hunting in 2022, work on saving more of a down payment, and try out the housing market again 12 months down the line.

Of course, it may be possible for you to find a home now that results in a mortgage that's far less than $414,114. But no matter what home loan amount you're looking at, you'll need to crunch the numbers to make sure they work for your specific budget.

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