Conforming Loan Limits and House Prices

As a follow-up to Nick Timiraos' article in the WSJ: Loan Size to Be Cut for Fannie, Freddie, here is a graph that shows the conforming loan limit compared to three house prices indexes (Corelogic, Case-Shiller National, and FHFA).


Click on graph for larger image.

In general the conforming loan limit has moved with house prices, however the conforming limit didn't rise as fast as house prices during the bubble.

Of course the conforming loan limit was held at $417,000 since 2006 - the limit wasn't reduced as house prices declined.

Using a comparison between house prices and the conforming loan limit for the period 1980 to 2000 (not distorted by the bubble), it appears the standard limit should be in the $385,000 range. I suspect the high cost limit will be continued - and will remain close to the current level.

Here are the historical conforming loan limits. And here are the current limits.