GSE loan limit approaches $550,000 as home prices jump 7.4%

In 2021, Fannie Mae and Freddie Mac’s maximum single-family loan size will grow to $548,250 in most areas, with a ceiling of $822,375 in pricier neighborhoods.

The baseline loan limit reflects a 7.42% seasonally adjusted home-price increase, according to the Federal Housing Finance Agency. The FHFA bases that increase on a year-over-year comparison of the average for the third quarter. The baseline limit during 2020 was $510,400, based on a 5.38% increase in home prices.

The price increase illustrates the extent to which federal rescue programs and a supply-demand imbalance have been a counterweight to economic pressures from the pandemic. The coronavirus was originally expected to exert downward pressure on housing values prior to the implementation of these programs.

U.S. home prices have grown every quarter since the third quarter of 2011, based on the FHFA’s seasonally adjusted home price index, which reflects a more limited data set than the one used to set the conforming limit. The baseline conforming limit has risen more than $100,000 during the past five years.

Regions where 115% of the local median home value exceeds the baseline conforming loan limit are generally considered high-cost areas under the Housing and Economic Recovery Act. The ceiling for high-cost areas represents 150% of the baseline loan limit.

Certain counties where there are high-cost loan limits can be found in California, Florida, Idaho, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, North Carolina, Tennessee, Utah, Virginia, Washington and Wyoming.

Alaska, Hawaii, Guam and the U.S. Virgin Islands have different calculations due to special statutory provisions. This year, their baseline loan limit is the same as the maximum high-cost loan limit.

All but 18 counties or county equivalents in the United States will have higher maximums next year.