The Federal Housing Finance Agency (FHFA) announced the conforming loan limit values for mortgages to be acquired by Fannie Mae and Freddie Mac in 2023 will be $726,200, an increase of $79,000 from $647,000 in 2022.
The Housing and Economic Recovery Act (HERA) requires the baseline conforming loan limit be adjusted each year to reflect the change in the average U.S. home price. According to the nominal, seasonally adjusted data from the 2022 FHFA House Price Index, house prices increased 12.21%, on average, between the third quarters of 2021 and 2022. As a result, the baseline conforming loan limit value in 2023 will increase by the same percentage.
For high-cost areas, locations in which 115% 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 such areas as a multiple of the area median home value, while setting the ceiling at 150% of the baseline limit. The ceiling loan limit for one-unit properties in high-cost areas in 2023 will be $1,089,300, which is 150% of $726,200.
Due to rising home values, the conforming loan limits will be higher in all but two U.S. counties or county equivalents in 2023. According to the FHFA House Price Index report, prices rose in all 50 states and the District of Columbia between the third quarters of 2021 and 2022. Prices rose in all but two of the top 100 metropolitan areas over the last four quarters. Two California metros, San Francisco-San Mateo-Redwood City and Oakland-Berkeley-Livermore, experienced year-over-year price declines, according to the FHFA.