Economy · August 3, 2022

By how much will Fannie and Freddie’s compliant loan limit increase for 2023?

from Active calculated risk 03/08/2022 11:54:00

Today, in the Calculated Risk Real Estate newsletter: How much will Fannie and Freddie’s compliant loan limit increase for 2023?

An excerpt from a letter:

With home prices soaring over the past year, an interesting question is: by how much will Fannie & Freddie’s compliant loan limits (CLL) increase for 2023? And by how much will the FHA secured loan limits increase?

First, there are different loan limits for different geographic areas. There are also different loan limits depending on the number of units (1 to 4 units). For example, the CLL is currently $ 647,200 for unit properties in low-cost areas. For Los Angeles County, the CLL is $ 970,800 for one unit properties (50% higher than the base CLL).

This graph shows the CLL since 1979. The CLL remained unchanged from 2006 to 2016.

Compliant loan limitThe adjustment is based on the value of the house price index in the third quarter divided by the third quarter of the previous year. The FHFA index is a repeat sales index, similar to Case-Shiller.

We currently only have data for the first quarter of 2022 for the quarterly index (+ 17.5% compared to the first quarter of 2021) and the buy-only index increased by 18.3% through May 2022.

We need house price data through September 2022 to calculate the compliant loan limit for 2023. This quarterly data will be released in late November.

Based on the current year-over-year change in house prices, the CLL could be close to $ 760,000 in 2023. However, year-over-year (YoY) house price growth is clearly slowing and it is possible that the CLL will be in the low to mid $ 700k range for 2023.

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