The combination of low inventory and rising prices is putting the spotlight on the size of mortgages.
The purchase index jumped 8% from a week ago.
"The average loan size for a purchase application set a record at $418,500," said Joel Kan, the Mortgage Banker's Association's associate vice president of economic and industry forecasting. "The continued rise in purchase loan application sizes is driven by high homeprice appreciation and the lack of housing inventory on the market – especially for entry-level homes."
"The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range," added Kan.
Overall, demand for mortgage applications increased 2.3% in the past week, according to the MBA's Weekly Mortgage Application Survey.
Refinancing took a hit in the past week as mortgage rates rose. That sent the refinance index down 3%.
"Mortgage rates hit their highest levels since March 2020, leading to the slowest pace of refinance activity in over two years," said Kan. "The 30-year fixed rate reached 3.64% and has increased more than 30 basis points over the past two weeks."
The rate on the 30-year fixed-rate mortgage increased from 3.52% in the prior week.
The survey covers over 75 percent of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.