Published on December 05, 2017
Written by Matthew Doffing
Last week, we wrote about how tight supply and slow turnover in the housing market have caused home prices across the country to increase. (Read that article here.) In the third quarter, home prices enjoyed a year over year increase of 6.8 percent, according to the latest House Price Index from the Federal Housing Finance Agency (FHFA).
In response to increasing prices, FHFA is raising the maximum conforming loan limits for Fannie Mae and Freddie Mac. Beginning January 1, 2018, the new maximum conforming loan limit will be $453,100. That’s an increase from $424,000 and matches the 6.8 percent year-over-year increase in home prices.
Loan limits will also be increasing in what the FHFA calls “high-cost areas,” where the local median home value is greater than 115 percent of the baseline loan limit. The new ceiling loan limit in most high-cost areas will be $679,650 for one-unit properties in the contiguous U.S. in 2018. Find a complete county-by-county list of loan limits here.
The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit for the GSEs be adjusted each year to reflect the change in the average U.S. home price.
The last time the FHFA raised the conforming loan limit was in January 2017, when it was set at $424,100. For 10 years prior to that increase, the loan limit was frozen at $417,000, a consequence of the housing crisis. Home prices have steadily increased since 2014.
Properties with multiple units will have baseline limits of $580,150 for two-family properties, $701,250 for three units, and $871,450 for four units. High cost areas will have maximum limits of $870,225, $1,051,875, and $1,307,175 respectively.
Industry commentators expect that the Veterans Administration and FHA will follow suit and raise their loan limits.