With home prices rapidly appreciating nationwide over the past year, the federal government has decided to raise the limits for loans it backs in 2024.

The Federal Housing Finance Agency announced on Nov. 28 that it would increase the maximum amount of money a homebuyer can borrow for the purchase of a single-family home using a conforming loan from $736,200 to $766,550 throughout most of the nation. In high cost areas like San Mateo and Santa Clara counties and most counties in the San Francisco Bay Area, the loan limit will increase to $1,149,825.00, up from $1,089,300.00 last year.

“The increases to the … loan limits will enable homebuyers to use the (Housing Finance Agency’s) low-down-payment financing to access homeownership at a time when a lack of affordability threatens to shut well qualified borrowers out of the market,” Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon said in a statement.

Silicon Valley Realtors applauded the news.

“This will be a great help for homebuyers looking to use FHA, Fannie Mae and Freddie Mac acquired mortgages,” Jim Hamilton, president of the Silicon Valley Association of Realtors, said. “Homebuyers in Silicon Valley are already challenged by rising home prices that have reached over a million dollars.”

Conforming loans are conventional mortgages that are eligible for purchase by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. The agency adjusts the borrowing limit each year based on the national average home price.

The 2024 borrowing limit is an increase of $40,350 from this year. The limit has increased by more than 50% since 2020, when it was $510,400.

The cap for high-cost areas crossed the $1 million mark for the first time last year and is $60,525 above the 2023 limit.

Hamilton noted housing affordability has significantly weakened in Silicon Valley, making homeownership unachievable even for households earning an above-average income.

“Due to the high living cost in Silicon Valley, residents need to earn a higher income compared to other more affordable areas. While the median income may be higher than $150,000 in high-cost areas such as ours, buyers need to earn over $400,000 to afford a median-priced home in these places,” Hamilton said.

According to the latest Housing Affordability Report by the https://www.car.org/ California Association of Realtors in the third quarter of this year, San Mateo County buyers needed a minimum annual income of $516,000 to qualify for a median-priced home. In Santa Clara County, buyers needed a minimum annual income of $484,800.

The Housing and Economic Recovery Act (HERA) requires the baseline conforming loan limit to be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price. According to the nominal, seasonally adjusted 2023 Federal Housing Finance Agency House Price Index report, home prices increased 5.56% on average between the third quarters of 2022 and 2023, so the baseline conforming loan limit in 2024 will increase by the same percentage. For areas in which 115% of the local median home value exceeds the baseline loan limit value, HERA sets the ceiling at 150% of the baseline limit. The new ceiling loan limit for one-unit properties will be $1.149 million, which is 150% of $766,550.

Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.

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