California REALTORS® are disappointed that the Federal Housing Finance Agency (FHFA) decided last month to keep the 2016 maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac at $417,000 on one-unit properties in most of the country and the cap of $625,500 in high-cost areas.
Loan limits for high-cost areas like Santa Clara County and much of the Bay Area, will remain at $625,500. The maximum conforming loan limit for 2016 will increase in 39 high-cost counties, including the California counties of Monterey, Napa, San Diego, and Sonoma, and several counties in Colorado, Massachusetts, New Hampshire, Tennessee and Washington.
Expressing disappointment that the FHFA did not raise the conforming loan limits for 2016 for much of the state, California Association of REALTORS® president Ziggy Zicarelli issued a statement saying, "Home prices in California have risen sharply over the past four years, yet conforming loan limits haven't changed during that time. Not increasing the loan limits will hurt California's housing market, further exacerbating housing affordability and preventing tens of thousands of California homebuyers from a chance at homeownership."
The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or "guarantee." Non-conforming or "jumbo loans" typically have tighter underwriting standards and carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.
The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit at $417,000 and mandated that after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels. The $417,000 loan limit will stay the same for 2016 because FHFA has determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007.
HERA provides for higher loan limits in high-cost counties by setting loan limits as a function of area median home value. Although other counties also experienced home value increases in 2015, after other elements of the HERA formula were accounted for, these local-area limits were left unchanged.
Chris Isaacson, president of the Silicon Valley Association of REALTORS®, said REALTORS® at the local, state and national levels have long advocated for making higher conforming loan limits permanent. "We are disappointed that the $729,750 limit stipulated in the Economic Stimulus Act of 2008 was not made permanent. Access to credit is a critical factor for would-be buyers struggling to afford homes, especially in many high-cost areas like Silicon Valley," said Isaacson. "The region is already losing many workers who cannot afford to live here because of the high home prices and the limited availability of affordable mortgages."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.