The government-sponsored enterprises will buy mortgages next year at a $766,550 conforming loan limit, the Federal Housing Finance Agency announced.

The threshold is up 5% from the current $726,200 limit for most single-family home loans. That increase was smaller than last year’s 12% hike, when annual home price growth was consistently in double digits. The new limit follows FHFA’s Home Price Index Tuesday morning showing house prices rising 5.5% year-over-year at the end of the third quarter.

Chart of the baseline conforming loan limit from 2016 to 2024.jpeg

Loan limits for high-cost areas will be $1,149,825, up from last year’s $1,089,000 mark, the FHFA said. That higher limit, which reached seven figures for the first time last year, will apply in areas in which the median home value is 115% of the baseline conforming amount. The price, determined by a formula under the Housing and Economic Recovery Act of 2008, caps that higher conforming loan limit at 150% of the baseline value.

The million-dollar limit also applies to one-unit properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands.

The new limit is a net positive for homebuyers, although it also represents an inflationary pressure, said Kyle Enright, president of lending at Achieve, a Bay Area home equity line of credit lender. 

“The more likely [home buyers] are willing to pay more for a home sort of perpetuates the cycle of upward pressure on housing prices,” he said.

The approximately $40,000 increase will provide a marginal boost to origination activity, Enright added, although the extra buying power isn’t as impactful in pricey markets like coastal California. 

The conforming loan limit boost is also favorable to HELOC lenders like Achieve, he said, with buyers holding more equity from their first day of homeownership. A 20% down payment on a home loan against the 2024 limit would equate to $153,310. 

Borrowers today still face a major affordability challenges with mortgage rates well above 7% amid elevated home prices and limited inventory. Fannie Mae continues to project a recession next year, and the GSE also puts total originations next year at $1.84 trillion after this year’s anticipated $1.53 trillion in volume. 

Larger mortgage players seeking an edge raised their conforming limits almost two months ago, with Rocket Mortgage announcing Oct. 2 a $750,000 single-family loan limit. Guaranteed Rate and United Wholesale Mortgage followed suit a week later.

Prices are rising in all but five U.S. counties, the FHFA said. They rose the most in New England, while the West Coast saw slower growth. The Albany-Schenectady-Troy region saw the highest year-over-year metropolitan home price growth (12.4%), while prominent pandemic destination Austin, Texas saw the largest decline (-5%).

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