It was the average mortgage taken out in November. Can you afford it?
The number might really shock you.
There’s a reason so many people have had a hard time buying a home this year. Home prices have skyrocketed nationwide, fueled by limited supply and strong demand from buyers. In fact, homes got so expensive that in November the average purchase mortgage was $ 414,114, reports the Mortgage Bankers Association.
To be clear, there has been a lot of activity in the upper end of the housing market (while there has been a noticeable shortage of starter homes). This could skew the average mortgage loan amount upward.
But still, for many buyers, a home loan near $ 414,114 is just not in the cards. And so the question is: will homes become more affordable in the short term? Or will many buyers have to sit back and wait for things to end?
What 2022 has in store for home prices
In the absence of a crystal ball, it is difficult to say how home prices will develop over the next 12 months. But there’s a good chance they won’t drop significantly in the first half of the year, and maybe not in the second half.
In order for house prices to go down, we need more inventory. Otherwise, buyers will have to continue to outbid each other for limited homes that are available, keeping prices high.
But buyers may not be so keen to list their homes. The surge in COVID-19 cases and the emergence of the highly transmissible variant of omicron could prevent hesitant sellers from putting their properties on the market.
Meanwhile, mortgage rates could climb a bit during 2022, but they will likely remain competitive on a historic basis. This means that buyer demand may not weaken at all, creating a scenario in which those struggling to afford a home today could stay in the same boat for months.
How To Find Out How Much A Home 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 are likely to exceed this threshold. Unfortunately, that could mean having trouble meeting your housing expenses or your bills in general.
Since home values could remain high in 2022, you may want to put your buying plans on hold if today’s prices are too inflated for you. This is especially true if you currently have a comfortable and flexible housing situation. If you’re able to renew a lease at an affordable rate for next year, for example, it might be worthwhile to put the search for housing on hold in 2022, work to save more on a down payment, and try to again the housing market 12 months. down the line.
Of course, you may be able to find a home now that will result in a mortgage well under $ 414,114. But whatever amount of home loan you are considering, you will need to analyze the numbers to make sure they are right for your specific budget.