How much will Fannie & Freddie’s matching loan limit increase for 2023?

by Calculated risk on 03/08/2022 11:54:00 AM

Today, in the Risk Calculated Real Estate Bulletin: How Much to Increase Fannie & Freddie’s Matching Loan Limit for 2023?

Brief excerpt:

With home prices rising sharply again over the past year, an interesting question is: How much will Fannie & Freddie’s matching loan limits (CLL) increase for 2023? How much will the FHA insured loan limits increase?

First, there are different loan limits in 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 valued at $647,200 for one-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 CLL since 1979. CLL has not changed from 2006 through 2016.

The adjustment is based on the value of the home price index in the third quarter divided by the third quarter of the previous year. The FHFA Index is a recurring sales index, similar to the Case-Shiller Index.

Currently we only have data for Q1 2022 for the Quarterly Index (up 17.5% from Q1 2021), and the Purchase Index is only up 18.3% through May 2022.

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

Based on the current year-over-year change in home price, CLL could be close to $760,000 in 2023. However, year-over-year home price growth is clearly slowing, and CLL could be in the low-to-medium range of $700,000. dollars for the year 2023.

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