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Conforming Loan Limits in California: Rising Home Prices


Although companies are starting to return to normal after the COVID-19 pandemic, many areas are still dealing with the challenges the pandemic created. The housing market continues to fluctuate as in previous years, which leaves Merced homebuyers wondering about the future of California’s housing market. The national housing market experienced a 15% increase in overall housing costs, explaining the slight drop in sales. Perhaps this can be partially contributed to the rise of conforming loan limit value on mortgages across the country. So, what does this mean for homebuyers in Merced and across the Central Valley? If you’re planning to purchase property in the Central Valley area, there are a few things you should consider.

Considering the National Baseline

Keeping an eye on the housing market’s national baseline gives us an understanding of conforming loan limits for 2022. The Federal Housing Finance Agency (FHFA) records the national statistics of home values over the course of each year. Considering seasonal fluctuations, the FHFA recorded prices increased over 18% over the past two years. Therefore, we can safely predict prices will continue to rise over the remainder of 2022.

The rising housing prices affect national conforming loan limits for 2022, and it’s something homebuyers need to keep in mind. Each year, these loan limits adjust to comply with the Housing and Economic Recovery Act (HERA) requirements. Paying attention to the national baseline gives us an understanding of how conforming loan limits will adjust nationally and in the Merced and Central Valley areas.

Rising Limits in High-Cost Areas

According to HERA, higher cost of living areas require loan limits that exceed the baseline mortgage limits. Places like Alaska and Hawaii, which are high-cost living areas, also have higher loan limits. Of course, local real estate costs are included in these numbers since each area includes localized expenses. The rising housing costs in high-cost living areas will probably cause conforming loan limits to rise with them.

How Will Loan Limits Affect Central Valley?

As of earlier this year, the Central Valley housing market costs were approximately $315,000, which is about a 23% increase from last year. Median home listings were just slightly below this average price. The increasing numbers show that conforming loan limits will need to increase to balance the rising costs of the housing market in California.

At the close of 2021, the Federal Housing Finance Agency (FHFA) announced that conforming loan limits in California would increase to match the rising housing costs. For example, a single-family home in Merced County will have a projected loan limit of $647,200, while a four-unit living space will have a limit of $1,224,850.

If you’re searching for a new home or want to sell a house in Merced or the Central Valley, contact Soldavi Realty today. We’re happy to answer any questions you may have about living in this area and are here to help you buy or sell your property.


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