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Government Increases Mortgage Limits in Luxury Markets Amid Rising Home Prices

Published Nov 28, 2023 03:33PM ET
Updated Nov 28, 2023 04:01PM ET

Government Increases Mortgage Limits in Luxury Markets Amid Rising Home Prices
© Reuters. Government Increases Mortgage Limits in Luxury Markets Amid Rising Home Prices

As a response to the escalating home prices in the United States, the Federal Housing Finance Agency (FHFA) has decided to raise the government-backed mortgage limits. This move will notably impact high-cost areas such as San Diego and Breckenridge, Colorado. In 2024, the cap for government-backed mortgages in the priciest regions will surge to nearly $1.15 million, a significant increase from the current limit of about $1.09 million. This adjustment aims to support potential homeowners in these affluent areas and reflects the steep climb in US housing prices.

Nationwide Mortgage Limit Increase

This upward adjustment isn’t just confined to the most expensive locales. Nationwide, the threshold for loans eligible for purchase by mortgage giants Fannie Mae and Freddie Mac is set to increase to $766,550, up from the current $726,200. This broad rise in limits signifies a response to the overall upswing in the housing market. In regions like San Diego County and key Colorado counties, known for their ski resorts and luxury real estate, the new limits will exceed $1 million, marking a significant threshold in the housing finance landscape.

Context of the Decision

The context for this decision is the relentless rise in US home prices, which have consistently set records in numerous cities. According to the latest data from S&P CoreLogic Case-Shiller, home prices nationwide have been on an upward trajectory for eight consecutive months, propelled by tight inventory and robust demand in urban centers. The rise in mortgage limits by the FHFA is a strategic move to accommodate this new reality, ensuring that government-backed financing keeps pace with the burgeoning market values.

Role of Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac, while not directly issuing mortgages, play a pivotal role in the housing finance system. They purchase mortgages from lenders, securitize them, and provide guarantees to investors for payment. The adjustment in mortgage limits reflects their response to market dynamics and the government’s continued support, especially following their pivotal role during the 2008 financial crisis. This decision underscores the ongoing government efforts to adapt and support the housing market amidst evolving economic conditions.

This article was originally published on Quiver Quantitative

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Orginal article: Link To Article – provided by Kansas City Realtors