The Federal Housing Finance Agency (FHFA) has announced that the baseline conforming loan limit will increase a record 18% to $647,200, which is an increase of $98,950 from $548,250 in 2021. In certain high-cost areas, which is defined as an area where 115% of the median home value exceeds the baseline conforming loan limit, the limit will now be $970,800.
An annual review of these limits is required by the Housing and Economic Recovery Act (HERA) and if deemed necessary, the HERA establishes new limits based on the average U.S. home price. As we’ve seen over the past year, home prices have seen a steady increase and with overall low inventory and high buyer demand, the HERA found it was necessary to increase limits to allow for more buying power overall.
Why are Home Prices so high?
With such low inventory throughout the year, low interest rates, and high buyer demand, competition for homes drove up prices. As seen in the chart below, the average home price in Massachusetts has increased every month through September, increasing $63,827 from January. In October, while we did see a slight decrease in average price, it’s important to note that during this time of year, we see more price adjustments than usual due to homes staying on the market longer than in previous months. The average price is still up year over year for October, by 10.6%.
What to Know as a Buyer
As we head into the new year, the increased loan amounts for 2022 will make it easier for buyers to qualify for higher loan limits and get more house overall, for less. Coupled with the lower interest rates we’ve seen, it’s the perfect opportunity for buyers to capitalize on what’s out there. It’s important to be prepared in each step of the process as well – homes are still going fast, and the increased limits will allow more buyers than ever to make offers.
These loan limits are effective between January 1, 2022, and December 31, 2022