The Federal Housing Finance Agency boosted the conforming limits for 2025 by over 5%, exceeding the annual gain in its Home Price Index used to determine the amounts.
The HPI rose in the third quarter by 4.3% year-over-year. This is the data the agency uses to make its determination as required by the Housing and Economic Recovery Act.
The new limit for one-unit properties in most areas will be $806,500, an increase of $39,950 or 5.2% from 2024.
Last year,
FHFA used what it termed an "expanded data" number to determine the new limits. That put the annual increase in the FHFA HPI at a 5.21% national average gain.
The expanded data set uses information from the government-sponsored enterprises, the Federal Housing Administration and Corelogic, whereas the purchase-only HPI reported is just from the GSEs, the FHFA said in response to an inquiry. "It is representative of [a] wider number of home sales," the agency added.
High-cost areas, defined as those where the median home value exceeds the baseline conforming loan limit by 115%, have a ceiling for one-unit properties at $1,209,750.
Furthermore, Alaska, Hawaii, Guam and the U.S. Virgin Islands also will have the $1,209,750 limit.
Not everyone was pleased with the increase. The Housing Policy Council reiterated its prior warnings about where the limits have been going.
"The question of the appropriate role of the government in the housing finance system has gone unanswered for far too long," the HPC statement said. "This latest increase in conforming loan limits is a reminder to the incoming Trump Administration that evaluating the proper role and scope of federal involvement in mortgage finance remains on the policy agenda."
Those high cost limits over $1.2 million show the "rapid rise in house prices has fueled a growth in loan limits that exceeds the growth in household income. As a result, more and more upper-end borrowers have access to federal support for financing mortgages, which puts upward pressure on house prices," the group noted.
Community Home Lenders of America Executive Director Scott Olson also pointed to the statutory mandate that requires the FHFA to adjust the limits as a result of home price inflation.
"The 5% increase only accentuates the fact that home prices continue to increase, while mortgage rates remain high, further stressing homeownership affordability," Olson said.
The Mortgage Bankers Association viewed the higher limits more positively.
"The statutorily required 5.2% increase reflects the continued price-appreciation across the country because of low supply and should help borrowers - especially in high-cost areas - obtain a conventional mortgage next year," said a statement from Bob Broeksmit, president and CEO.
The new limits ended up exceeding expectations of several nonbank lenders who engage in the annual race to beat the new conforming amounts. These lenders are able to hold the loans on the balance sheet until the new year.
United Wholesale Mortgage
Chicago-based Rate only went to $792,000 but a number of others, including
"At CrossCountry Mortgage, our data and analytics team continuously monitors home pricing indices, forecasts and market trends to inform our decisions," said Brett Schiffer, that lender's chief credit officer, in an emailed response. "Strong home price appreciation, particularly in regions like the Northeast and Midwest where growth has been around 5%, factored heavily into our approach."
At the same time, the Department of Housing and Urban Development put out its limits for the FHA forward and reverse mortgage programs, which are based off of the FHFA actions.
For one-unit properties, the limit for forward mortgages in low-cost areas is $544,225. The high-cost area ceiling is the same as the FHFA's, at $1,209,750. But for Alaska, Hawaii, Guam and the U.S. Virgin Islands, the FHA will insure loans up to $1,814,625.
The Home Equity Conversion Mortgage maximum claim amount will also rise to $1,209,750.
"Today's announcement of loan limit increases, calculated according to statute, enables the FHA program to keep up with nationwide price appreciation," said Federal Housing Commissioner Julia Gordon in a press release. "Regular adjustment of loan limits ensures that FHA financing continues to be available in all markets to all those who rely on our programs to access homeownership."
In comparison
"U.S. house price growth slowed in the third quarter, continuing a trend that started in the fourth quarter of the previous year," said Anju Vajja, deputy director of the FHFA's Division of Research and Statistics, in a press release on the HPI. "While house prices continued to increase because housing demand outpaced the locked-in housing supply, elevated house prices and mortgage rates likely contributed to the slowdown in price growth."
In the fourth quarter of 2023, annual price appreciation was 6.6%, rising to 6.9% in the first quarter before falling to 5.9% for the third quarter.
It's a far cry from the 11.8% increase in the third quarter of 2022.
The Corelogic S&P Case-Shiller index was also released Tuesday morning. It reported a 3.9% year-over-year price increase.
But that represented six consecutive months where the annual rate of appreciation has slowed.
Still, while the increase was positive for homeowners' equity, it also makes housing less affordable, Ernie Durbin, chief valuation officer for Voxtur, said in a statement.
"We must closely monitor this index as the new Trump administration's policies take effect," Durbin warned. "Implementing sweeping tariffs on imports could significantly raise the prices of new construction, further straining housing supply and affordability."
During the moving process, homeowners usually incur additional expenses for the purchases of appliances, furniture and more.
"If tariffs force higher prices, these potential purchases could also dampen consumer activity," Durbin said.
