$726,200 is the base amount. Higher cost areas have access to higher limits based on the average home prices in that area. The county by county limits are listed separately, HERE. The highest tier is $1,089,300 (base loan limit x 1.5).
Where do these numbers come from?
The Federal Housing Finance Agency (FHFA) is the regulator of the GSEs. It publishes various home price data. Once the data is in for the 3rd quarter (typically by late November), it is compared to the 3rd quarter of the previous year and home prices are adjusted by the corresponding amount.
In situations where home prices fall, the limit does not fall, but it will not rise again until home prices move back above the levels associated with the previous limit. For instance, let’s imagine the loan limit was $700k, but prices fell enough to drop it to $600k. The limit would remain at $700k year after year (even if prices were rising) until prices got back above $700k.
Having said that, it is obvious that we are not currently experiencing a decline in housing prices year over year. The FHFA price index did experience minor monthly dips in the months of July and August, but September saw a recovery. When it comes to monthly movement, the Case-Shiller price index, which is typically very similar to the FHFA, continued to fall in September.
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