95% of counties in the country will start 2020 with higher Federal Housing Agency (FHA) loan limits than 2019. This is an important change for the housing market plagued by affordability challenges because communities that are priced below the FHA loan limit sell nearly 2-to-1 compared to those above, according to Zonda.
The FHA sets a ceiling and floor each year for the loan limits based on median home prices. The new ceiling of $765,600 is 5% higher than the $726,525 from last year. Metros like Seattle, Los Angeles, and New York fall under that umbrella. The floor of $331,760 is seen in places like Orlando.
Among major markets, the new loan limits increased the most on a percentage basis in Las Vegas, Salt Lake City, and Atlanta up 7%, 7%, and 6%, respectively.
Houston, snubbed from an increase in 2019, saw a tiny 0.2% increase in the loan limit from 2020 from $331,200 to $331,760.
"The newly released FHA loan limits support today's housing market by offering buyers lower down payment and credit score options."
Tim Sullivan goes on to explain, “We are continually working with our clients on creative ways to build communities that offer homes with an average selling price below the FHA loan limit.”
Under the criteria, an additional 20+ new home communities fall within the new limits in Phoenix, Las Vegas, and San Antonio. Other big winners of the higher limits include top counties in Atlanta, Salt Lake City, and Dallas.
The change in the FHA loan limits follows the 5% increase in conforming loans announced by the Federal Housing Finance Agency (FHFA) late last month. While higher limits from both organizations were slow to keep pace with home price appreciation a few years back, the moves by both the FHFA and FHA are positive for buyers looking to enter today’s housing market using financing.