FHFA Announces Conforming Loan Limit Values for 2023
The baseline Conforming Loan Limit Will Increase to $726,200
FOR IMMEDIATE RELEASE
11/29/2022
Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced the conforming loan limit values (CLLs) for mortgages to be acquired by Fannie Mae and Freddie Mac (the Enterprises) in 2023. In most of the United States, the 2023 CLL value for one-unit properties will be $726,200, an increase of $79,000 from $647,200 in 2022.
National Baseline
The Housing and Economic Recovery Act (HERA) requires that the baseline CLL for the Enterprises be adjusted each year to reflect the average U.S. home price change. Earlier today, FHFA published its third quarter 2022 FHFA House Price Index® (FHFA HPI®) report, which includes statistics for the average U.S. home value increase over the last four quarters. According to the nominal, seasonally adjusted, expanded-data FHFA HPI, house prices increased 12.21 percent, on average, between the third quarters of 2021 and 2022. Therefore, the baseline CLL in 2023 will increase by the same percentage.
High-Cost Areas
For areas where 115 percent of the local median home value exceeds the baseline conforming loan limit, the applicable loan limit will be higher than the baseline loan limit. HERA establishes the high-cost area limit in those areas as a multiple of the area median home value while setting the ceiling at 150 percent of the baseline limit. Median home values generally increased in high-cost areas in 2022, which increased their CLL. The new ceiling loan limit for one-unit properties will be $1,089,300, 150 percent of $726,200.
Special statutory provisions establish different loan limits for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $1,089,300 for one-unit properties.
Why And How Much They Increase Each Year
The Housing and Economic Recovery Act of 2008 (HERA) requires that the baseline conforming loan limit (CLL) value be adjusted each year to reflect the changes in the national average home price. HERA specifies that the Federal Housing Finance Agency (FHFA) “establish and maintain” an index for tracking average home prices for this purpose. In May 2015, FHFA published a Notice and Request for Input announcing its plans to use the nominal, seasonally adjusted, expanded-data FHFA House Price Index (HPI) for this purpose.1 Having received generally favorable feedback to the announcement, in October 2015, FHFA published a Final Notice declaring that it would follow the original plan.