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Because the real estate market has skyrocketed to brand new highs, caused by a record shortage of inventory, supply chain delays, and low interest rates…Fannie Mae and Freddie Mac are expected to increase their baseline loan limits by 18%, or “to just under $1 million in high-cost markets,” in a way to reflect the current landscape of real estate.
As The WallStreetJournal reports: “The increase may make it easier and cheaper for some borrowers to buy a home, particularly in more expensive areas of the country, but the higher limits are also likely to elevate debate about how big of a mortgage is too big to be backed by the government.”
On the one hand, this gives buyers more room to purchase a home in these current conditions…and given how quickly prices have been rising, the new loan limits would simply “BUMP UP” to match where the market is selling. Not to mention, these higher limits would no longer punish buyers who happen to live in a market where “starter homes” fetch $1 million dollars because Facebook took over…so, in a way – it could be fairly justified.
But, on the other hand…”some housing experts say the expected jump in loan limits raises questions about the appropriate role of the government in housing… and whether taxpayers should effectively backstop sky-high housing prices, when Fannie and Freddie’s market share is already rising.”
PERSONALLY…I’m under the belief that, once the labor and supply chain shortages begin to stabilze..more inventory will come on the market and prices will begin to cool down. As far as WHEN that is going to happen – the Federal Reserve thinks about 18-24 months…but, it’s anyone’s guess…and, the real estate market could remain high for quite some time.
There’s also the talk about 18% of home sales being sold to investors…which, could be a sign that people are worried about rising inflation and want to hedge their position with low interest rate real estate…but, it could also just as easily be a sign that investors are buying properties for the sole purpose of fixing them up, and then immediately re-selling them back to an owner-user in a highly competitive market… so, who knows to what extent investors are really buying properties.
Either way…larger loans could be seen as a temporary solution, but – at some point – the real issue needs to be addressed, which is the fact that more homes need to be built to satisfy demand.
In terms of what YOU can do about it…honestly, the best course of action is to simply wait until you find the right deal, only buy with the intention of holding for at least 7-10 years, lock in fixed rate 30 year mortgage…and, no matter what…smash the like button.
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For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/