Higher limits help, but affordability remains the biggest challenge for many buyers
Uncle Sam has checked the listings, cruised the neighborhoods and crunched the data and found just-the-perfect gift – a holiday cheer-like increase in the conforming loan limit values for mortgages bought by Fannie Mae and Freddie Mac.
Just what you wanted. But it’s only for home shoppers with a good credit score – and likely a nice pay package.
The Federal Housing Finance Agency boosted the loan limit for most single-family homes nationwide to $806,500, an almost $40,000 – or 5.2% — increase from a year ago. The increase takes effect on Jan. 1.
Higher-priced areas – such as the Bay Area, Los Angeles and Orange counties – will have a maximum of almost $1.21 million, a 50% increase from the base limit.
The Central Coast – from Santa Cruz to Ventura counties – San Diego and the Wine Country will also have higher limits, from $897,000 to $1.18 million. Check county limits here.
AFFORDABILITY CHALLENGES AND HOME SALES STRUGGLE
The bump in the conforming loan limit comes as the housing market nationwide faces its worst sales since 1995.
California home sales have fared much better, thanks to still-solid demand and more homes on the market, especially compared to the past two years. Home sales increased 9.5% in October compared to a year ago, according to the California Association of Realtors.
The median-home price – meaning half the homes sell for more, the other half for less – climbed to $888,740, a 5.8% increase from a year ago but down from the record-high reached during the late spring.
Even with the federal increase in the lending limit, affordability remains the biggest concern – and hurdle – for many home shoppers in California. Only about one of every six households could afford to buy a home in California during the third quarter – about a third as many as in 2012, according to the California Association of Realtors.
California has 80% of the priciest housing markets in the U.S., including seven of the 10 most expensive with Atherton in the Bay Area topping the list, according to PropertyShark. Buyers in high-priced cities such as Newport Beach and Santa Barbara access jumbo loans not Fannie Mae- or Freddie Mac-backed mortgages. Or they buy with cash.
But for a large majority of Californians, the boost in the conforming loan limit is good news, even if buying is a challenge. In lower-priced areas, like the Central Valley and Far North, the increase will help more.
The Federal Housing Finance Agency oversees Fannie Mae and Freddie Mac, which buy loans from mortgage lenders and guarantees the investment from default, a rather low risk these days based on homeowner equity. The mortgages are bundled into securities and sold.
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