There is big news in the mortgage industry! Fannie Mae announced that they are raising the government mortgage limits to a record level for 2022. Does this mean we’re going to have a housing crash? Are we recreating a bubble?
Fannie Mae officially announced that the conventional jumbo loan limits are increasing to $647,000 in 2022, an increase of 18%. Let’s put this in perspective. This means that first-time homebuyers will now be able to do 3% on a $665,000 home with a conventional non-jumbo loan. 95% of the financing of non-jumbo loans will now be available to repeat home buyers on a $680,000 purchase, which is a very significant increase.
The federal government will now back mortgage loans of nearly $ 1 million with the new ceiling loan limit for one-unit properties. In 2021, the limit was $548,000, which was a 7.5 increase from the previous year. Over the past six years, the baseline loan has risen $230,200 which is quite the increase. A 2018 law determined that the limit was going to be $417,000. They had to get back to pre-recession levels for home prices. Obviously now, we are completely crushing and blowing those home prices out of the water.
Before this news came out, I was reporting on the seven different pricing forecasts. Zillow was at 13.6% and Goldman Sachs was at 13.5% annualized. They were talking about a 16% increase in home prices from October until the end of next year. There were others who predicted somewhere between 7 and 8%. In my opinion, increasing the loan limits by this much is only going to increase those home values even more.
I don’t know that we’re going to see more than that 13% that the top economists are projecting, but I don’t know what else people would want to spend their money on right now. This is a huge jump.
So while home prices have increased 20%, you can go out and buy that more expensive home. This makes it a lot easier for a lot more buyers to be able to purchase and it makes it easier for them to get into bidding wars because they’re borrowing the money. I think this does nothing other than increase home prices.
Are we in bubble mode with this? There are still no signs of a bubble, but it certainly means prices are going nowhere but up in the near future. Don’t forget to leave a comment and subscribe to my youtube channel to stay up to date on the latest real es