Government Helping to Make Homeownership Possible for More Buyers Even in Luxury Real Estate Markets

Since their inception, government agencies Fannie Mae and Freddie Mac have been helping to make buying a home easier for many homebuyers across the country. Both agencies function by purchasing home loans from lenders to free up available funds to be loaned again, and then making a return on the other side. This increases the amount of money that lenders have to lend to buyers. In 2008, the Housing and Economic Recovery Act required Fannie Mae and Freddie Mac to maintain a “conforming loan limit” that is within narrow limits near the market value for homes in any given area. The law’s purpose was to make it easier for homebuyers to borrow money in markets across the country.

Since the law was passed in 2008, a normal year sees average home increases nationally of several thousand dollars, meaning the conforming loan limit rose marginally each year as well. 2021, however, has not been an average year. This year saw record inflation and home price increases. The FHFA’s Home Price Index is reportedly 18% higher this year than last. This means that the loan conforming limit for Fannie Mae and Freddie Mac will rise an astounding amount, requiring that the agencies purchase mortgages that are $100,000 more than last year! The loan conforming limit for a single family home was previously $548,250 and will now jump to $647,200. Every county in the United States will see higher loan conforming limits except four!

In cities where the average home price far exceeds the national average, the loan purchase limit requirement for Freddie Mac and Fannie Mae will be $970,800. These higher loan conforming limits will be in effect in 102 American counties in 2022. The higher loan purchases are typically in counties in and around major metropolitan areas in New York, Washington DC, and California.

This obvious example is indicative of the Florida Keys real estate market, which has seen tremendous growth in 2021. While the average home price nationally has increased by 18%, prices for homes for sale in the Florida Keys have increased by a tremendous 28.5% in 2021. While many buyers hope for relief in 2022, it is unclear how much relief will actually come. As the market for second homes grows and as buyer preferences shift more toward vacation spots as permanent residences, the market may to be able to remain stable in this current trend for the immediate future.