The Federal Housing Finance Agency (FHFA) has announced that the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac will increase to $766,550 in 2024, an increase of $40,350 from 2023. This is the largest single-year increase in conforming loan limits since 2008. Given the recent run up in home prices over the past several years combined with persistently high inflation, this move does not come as a surprise. We discuss what this means for home buyers and the housing market as as whole.
What are conforming loan limits?
Conforming loan limits are the maximum amount that Fannie Mae and Freddie Mac will purchase a mortgage for. These limits are set by the FHFA and are adjusted annually based on changes in national median home prices. With this said, the Housing and Economic Recovery Act (HERA) requires FHFA to adjust the Enterprises’ baseline conforming loan limits value each year to reflect changes in the average U.S. home price.
For areas in which 115% of local median home values exceed the baseline, the applicable loan limit is higher than the baseline limit. HERA also establishes the high-cost area limit, with a ceiling at 150% of the baseline limit. An example of this in the Sunshine State would include most of Monroe County where the local median home values are higher.
What does this mean for home buyers?
The increase in conforming loan limits means that home buyers in high-cost areas will be able to borrow more money to purchase homes. For example, in a high-cost area where the median home price is $900,000, a home buyer would now be able to borrow up to $766,550 with a conforming loan, instead of the previous limit of $726,200. In addition, the increase in conforming loan limits could also help to boost home sales and prices in high-cost areas.
What are the implications for the housing market?
The increase in these loan limits is a positive sign for the housing market. It could help to make homeownership more affordable for some buyers and could also lead to increased home sales and prices.
However, it is important to note that the increase in these loan limits is not a guarantee that home ownership will become more affordable. Other factors, such as rising interest rates and inflation, could still make it difficult for some buyers to qualify for mortgages.
Overall, this increase to the conforming loan limits does not come as a surprise given the recent run up in home prices across the country. Nonetheless, this is welcomed news for home buyers here in South Florida. Ultimately, this is a positive development for the housing market. It could help to make homeownership more affordable for some buyers and could also lead to increased home sales and prices.
Are you looking to buy a home here in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today. Also, be sure to download the free Florida Home Search app for your smartphone or tablet.