Fannie Mae FNMA and Freddie Mac FMCC has responded to the rising median home price levels by increasing the conforming loan limits for mortgages that they acquire for secondary market sale.
What Happened: The Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, announced that their conforming loan limits on one-unit properties in 2022 will be $647,200, an increase of $98,950 from the current $548,250 level.
In pricier housing markets where 115% of the local median home value exceeds the baseline conforming loan limit, the 2022 ceiling loan limit for one-unit properties will be $970,800, a 150% increase from the current $647,200 level.
The FHFA added that there will be different loan limits for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In those areas, the baseline loan limit will be $970,800 for one-unit properties.
Why It Happened: The new loan limits reflect the higher cost of homeownership. According to the FHFA’s House Price Index, home prices increased 18.05%, on average, between the third quarters of 2020 and 2021. That percentage equals the baseline conforming loan limit increase.
Earlier in the day, another housing market monitor nearly mirrored the FHFA’s statistics: The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, reported a 19.5% annual gain in September. Among the 20 cities tracked by the index, Phoenix saw the greatest price gains with a 33.1% spike.
“All 20 cities saw price increases in September, and all 20 cities stand at their all-time highs,” said Craig J. Lazzara, managing director at S&P Dow Jones Indices. “September's price increase ranked in the top quintile of historical experience for all 20 cities, and in the top decile for 17 of them.”
However, Lazarra noted that in 14 of 20 cities, September’s annual price gain was lower than the increases recorded in August.
“We have previously suggested that the strength in the U.S. housing market is being driven by households' reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes,” he said. “More data will be required to understand whether this demand surge represents simply an acceleration of purchases that would have occurred over the next several years, or reflects a secular change in locational preferences. September's report is consistent with either explanation.”
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