For the second year in a row, the FHFA is increasing the conforming loan limits for Fannie and Freddie in 2018.
- FHFA increasing the conforming loan limits for Fannie & Freddie in 2018
- 2018 loan limit increase from $424,100 to $453,100
- Homes have returned to pre market decline levels
- Housing market back on the rise
The housing market is on the rise. House prices have increased 6.8%, on average, between the third quarter year-over-year from 2016 to 2017. This improvement means that the FHFA can approve an increase on the conforming loan limits from $424,100 to $453,100 in 2018. The growth in loan allowance had been dependent on the market recovering from a series of price decline benchmarks – which it was able to accomplish in the previous year and has continued to improve upon for the second year in a row.
The Housing and Economic Recovery Act of 2008
In 2008 the Housing and Economic Recovery Act was passed. This act would create safeguards by establishing limits on the amount of money Fannie and Freddie are allowed to approve for loans by setting a baseline loan limit of $417,000. The Act also mandates that the loan amount cannot increase should there be a period of market declines until the market can return to pre-decline levels.
The FHFA loan limits were finally increased for 2017, from their $417,000 limitation set in 2008, to $424,100.
6.8% Year-Over-Year Growth
Enter the 2017 housing year, which has been another fantastic year of market growth. The 2017 third quarter House Price Index reported a 6.8% average increase from 2016 through 2017 in the market. As a result, the FHFA had the option to approve another increase to the conforming loan limits.
As home prices have continued to be on the rise, the FHFA has approved another increase for 2018 to $453,100.