What You Need to Know About the 2018 Mortgage Limit Increases
Starting next year, homebuyers throughout Chicagoland will be able to apply for larger mortgages backed by Fannie Mae and Freddie Mac, as our local housing market benefits from rapidly rising home prices in other parts of the country. In other words, this is happening because federal housing officials have just increased the amount of money people are allowed to borrow under conventional loan programs. So, what does this really mean for the homebuyer?
Well, the truth remains unclear. The market here in Chicago is expected to grow at a slower pace than other cities, but experts aren’t quite sure just how much that is going to help our local market.
The Federal Housing Finance Agency has set the maximum “conforming” loan size for 2018 at $453,100 for a single-family home in most parts of the U.S. That is the loan size that can be sold to Fannie Mae and Freddie Mac. It’s a 6.8 percent increase from last year’s maximum loan size of $424,100. The maximum loan limits are also increasing in 2018 for multi-unit properties. For two-flats, they will increase to $580,150, for three-unit buildings up to $701,250, and for four-unit properties up to $871,450.
This will be the second consecutive year the agency has raised conforming loan limits since the first bump in 2006. Of course, that was before the housing crisis. The reason for today’s increase is because of the 6.8 percent rise in home prices during the third quarters of both 2016 and 2017.
Year after year, in the third quarter, we’ve seen home prices rise 4.86 percent in Chicagoland and 3.8 percent in the entire state of Illinois. Local gains have been nowhere as steep as elsewhere, as tight inventory has pushed home prices in some parts of Chicago’s housing market this year.
For a closer look at home-price measurements, the S&P CoreLogic Case-Shiller home price index also released the latest numbers and found that nationally, September home prices rose 6.2 percent year after year and 3.9 percent in the Chicago area.
So, what’s actually behind the lackluster local gains? Well, according to industry experts, we can place much of the blame on slower job and household growth. The lack of upward motion has helped keep price growth in Chicago and the surrounding areas lower than in many other major metro areas. With this trend, we can expect to see slower price growth in the new year in and around Chicago as well as slower sales levels that will likely stay in line with those that we saw in 2017.
This next year should see home prices in the Chicago area increase around 2.57 percent. That’s lower than the national average where industry professionals expect to see a 3.2 percent increase. These smaller gains throughout the country are likely due to the shortage of homes available for sale but should ease toward the end of next year.