The reduction in Federal Housing Administration loan limits back in January was “ill-timed” and diminished the pool of potential 2014 homebuyers, according to analysts at Sterne Agee.
“We believe last year’s cuts were ill-timed because purchases of single-family loans to rent had sharply increased local housing prices, and the loss of FHA financing for certain buyers probably delayed or extinguished their willingness to buy a home,” analysts Jay McCanless and Annie Worthman said in a Nov. 25 report.
Meanwhile, home prices have appreciated over the past 12 months.
On Monday, the Federal Housing Financial Agency posted the new loan limits for Fannie Mae and Freddie Mac single-family loans.
For 2015, the FHFA raised the limits in 46 counties where median home prices are already at $417,000 or higher. Many of the 46 counties are in the metropolitan areas, including San Diego, Denver, Boston, Baltimore, Nashville and Seattle.
The smallest loan limit increase was $5,750 in Ventura County, Calif., which now has a $603,750 maximum loan limit. The largest increases were $47,150 in seven Boston area counties, which now have a maximum loan limit of $517,500.
FHA is expected to raise its loan limits in more areas than the FHFA due to the loan limit reductions in January. Roughly 650 counties were affected by the changes.
“We believe the FHA could raise loan limits in markets where limits were lowered last year due to median home price appreciation over the past 12 months,” according to the Nov. 25 report Sterne Agee report.
“If the FHA mortgage limits are raised in response to local market price appreciation, we believe the pool of eligible [home] buyers would increase all else being equal,” the analysts say. Sterne Agee is in investment banking firm based in Birmingham, Ala.
Department of Housing and Urban Development officials are expected to release the new 2015 FHA loan limits next week for counties with median home values above $270,050.