FHA and GSE (Fannie Mae / Freddie Mac) loan limits are increasing again in 2023, which will be a major benefit to builders as they grapple with slow new home demand and home buyer affordability issues amidst 6%+ mortgage rates and high inflation.
The 2023 loan limit increases vary by MSA, but every major market will get at least a $51K loan limit increase this year. These are massive increases, and we expect these increased loan limits to have a positive impact on new home sales, beginning with home sales contracts right now, and home closings next year.
Higher FHA and GSE (Fannie/Freddie) loan limits will help builders target additional buyers and combat affordability concerns. The biggest positive impacts for these increased loan limits include:
- FHA loans go primarily to entry-level buyers with low down payments and/or lower credit scores, many of whom will be able to qualify for a higher balance mortgage in 2023 than they could qualify for in 2022
- GSE loans go primarily to higher credit entry-level and move-up buyers, who previously would have had to qualify for a jumbo loan.
Many new homes are priced right above today’s loan limits, so this will open up the pool of potential home buyers next year.
Loan limits are indexed against home price appreciation from the prior year. We expect these numbers will stay flat for some time since home prices are now falling in many areas, and the government typically does not lower the limit when the market corrects. See below for 2023 loan limits across the top housing markets we track:
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