U.S. Govt Plans to Back Much Higher Mortgages
The U.S. government’s plans to raise the cap for mortgages backed by Freddie Mac and Fannie Mae to close to $1 million in high-cost areas are meant to assist home buyers as prices continue to rise, but some warn that the move may not make much of a difference and could push prices even higher. The conforming loan limit or the maximum amount of a mortgage that Freddie Mac and Fannie Mae will guarantee or buy is set to jump in 2022, The Wall Street Journal reported on Tuesday. For most areas, the limit is set to rise from $548,250 to $650,000, but in high-cost markets, such as New York City or the Bay Area in California, it would jump from $822,375 to just under $1 million. The exact loan limits are set to be announced Nov. 30 by the Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae. The median home price in the U.S. was $380,000 in October, up 8.6% compared to last year and up 21.8% compared to 2019, according to a report released by Realtor.com. The increased limits mean more home buyers will have access to conventional loans, which typically have lower down payments and interest rates than the jumbo loans available for higher-priced properties. That increased demand will likely result in more competition and higher prices, according to Jonathan Miller, the CEO of the New York City-based appraisal firm Miller Samuel and the author of Douglas Elliman’s market reports for a number of top markets in the U.S. There’s also an ongoing supply issue in the U.S., Miller noted. If more potential buyers enter markets that already have an existing shortage of homes, it will further fuel rising prices. In high-cost markets which number about 100 of the 3,000 counties in the U.S., according to the Federal Housing Finance Agency the change may not make much of a difference.
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