# How Much will the Fannie & Freddie Conforming Loan Limit Increase for 2023?

### The Official Limits will be released On Tuesday, November 29th

How much will the Fannie & Freddie conforming loan limits (CLL) increase for 2023? And how much will the FHA insured loan limits increase?

First, there are different loan limits for various geographical areas. There are also different loan limits depending on the number of units (from 1 to 4 units). For example, currently the CLL is $647,200 for one-unit properties in low-cost areas. For Los Angeles County, the CLL is $970,800 for one-unit properties (50% higher than the baseline CLL).

The CLL for each county is available at 2022 Conforming Loan Limits (excel file).

The limit is updated annually, and is adjusted using the FHFA’s quarterly national, seasonally adjusted, expanded-data index: Expanded-Data Indexes (Estimated using Enterprise, FHA, and Real Property County Recorder Data Licensed from DataQuick for sales below the annual loan limit ceiling). **The adjustment is based on the House Price Index value in Q3 divided by Q3 in the prior year**. The FHFA index is a repeat sales index, similar to Case-Shiller.

Note: This calculation has changed with the Housing and Economic Recovery Act of 2008 (HERA). Also, in 2015, the FHFA decided to use the seasonally adjusted expanded data index.

This graph shows the CLL since 1979. Note that during periods when house prices decline, the CLL is not reduced. The CLL was at $417,000 from 2006 through 2016, and only increased slightly in 2017 as the house price index caught back up to the previous high reached during the housing bubble.

### Using Purchase-Only Index as a Guide

**We need the house price data through September 2022 to calculate the conforming loan limit for 2023**. This quarterly data will be released on November 29th. Currently we only have data for Q2 2022 for the quarterly index (up 17.0% from Q2 2021), however, the Purchase-Only index was up 11.9% through August 2022. Clearly prices have slowed sharply in Q3. **Using the purchase index as a guide, and assuming a similar decline in September in the YoY price change - the CLL will increase around 12% in 2023.**

Based on an estimated 12% year-over-year house price change, the CLL will be around $725,000 in 2023.** ** For high-cost areas like Los Angeles, the limit could increase to around $1.08 million.

What about FHA insured loans? From the FHA:

FHA's nationwide forward mortgage limit "floor" and "ceiling" for a one-unit property in CY 2022 are $420,680 and $970,800, respectively.

The current FHA insured limit (low-cost area) is 65% of $647,200 or $420,680. In high-cost areas, the FHA insured limit could be as high as $970,800. The limit varies by geographical area (based on average house prices).

Note that HERA changed this relationship. For low costs areas, prior to HERA, the FHA insured limit (low cost) was 48% of the CLL.

Once again, we need the expanded index house price data for September but based on the purchase index estimated changes, t**he FHA insured limit could increase to around $470,000 for low-cost areas** (and much higher for high-cost areas).

Even though year-over-year price growth has slowed sharply over the last few months, there will be another significant increase in the CLL for 2023.