As housing market cools, conforming loan limits to rise for 2023
The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
Even as the housing market cools after a record-breaking run, the Federal Housing Finance Agency announced that loan limits for mortgages that can be bought by Fannie Mae and Freddie Mac in 2023 will jump from 2022 levels.
For much of the U.S., the divide between conforming loans and jumbo mortgages will be $726,200. That’s about a 12 percent increase from this year’s limit of $647,200.
In pricey housing markets — including much of California, all of New York City, the District of Columbia and the entire states of Alaska and Hawaii — the new limit is $1,089,300, up from $970,800 in 2022.
And some markets fall in between. In Colorado’s Boulder County, the new limit for conforming loans is $856,750. In Florida’s Monroe County, home to the Keys, the limit is $874,000. In the Nashville, Tennessee, market, it’s $890,100.
According to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, the increase was based on its House Price Index for the third quarter of 2022. After the coronavirus recession began in early 2020, the housing market caught fire — inventories fell to record lows, buyer demand soared and mortgage rates dropped below 3 percent.
The housing market has been cooling in 2022, but home values in most areas remain far above their 2021 levels, with prices up 12.4 percent from the third quarter of 2021 to the third quarter of 2022. Florida led the way with a 22.7 percent jump in prices, followed by South Carolina’s 18.4 percent spike.
“House prices were flat for the third quarter but continued to remain above levels from a year ago,” Federal Housing Finance Agency economist William Doerner said in a statement. “The rate of U.S. house price growth has substantially decelerated. This deceleration is widespread with about one-third of all states and metropolitan statistical areas registering annual growth below 10 percent.”
Rising loan limits allow a wider group of borrowers to qualify for the loans backed by Fannie and Freddie. Because the market for jumbo loans is smaller than the market for conforming loans, jumbo borrowers might need to shop around a bit more to find a mortgage.