Conforming Loan Limit Almost Jumps $100k

We all knew the increase to confirming loan limits was going to be big, but I’m not sure anyone thought it would be six figures big…(FHFA)

• The Federal Housing Finance Agency announced the new loan limit will be $647,200, an increase of $98,950 (+18.0%) from 2021. The previous high was set in 2006 when it jumped 15.9%.

• High cost areas will also see an increase to $970,800, which is 150 percent of $647,200. 

FHFA Acting Director Sandra L. Thompson had an interesting comment about these changes…

• “FHFA is actively evaluating the relationship between house price growth and conforming loan limits, particularly as they relate to creating affordable and sustainable homeownership opportunities across all communities,”

This is interesting, because recently the Wall Street Journal Editorial Board criticized proposed conforming loan limits getting close to one million dollars…(WSJ)

• “The government backstop was intended to assist low- and middle-income buyers. Now it subsidizes affluent Americans who don’t need the help, which contributes to elevated prices, especially in expensive markets.”

• “The solution is for local governments to encourage more housing development, not for the feds to prop up demand for high-end homes.”

I agree with the Wall Street Journal that raising loan limits will probably put upward pressure on prices. However, this current price spike has more to do with low inventory, low rates, and remote work than loan limits. Raising loan limits certainly won’t help, but until inventory levels and demand levels normalize prices are going to spike no matter what the FHFA does.