In a memo from the Department of Housing and Urban Development’s Housing Commissioner, HUD released the new Federal Housing Administration’s (FHA) maximum loan limits effective for all FHA loan applications received January 1, 2014 through December 31, 2014. While the decrease was expected in the industry, it could have a significant impact on real estate sales across the country.
The change is coming on the coattails of the expiration of the Economic Stimulus Act for 2008 (ESA). In an effort to inject life into a faltering market, Congress raised FHA’s loan limits during the 2008 housing market crash. Now that Congressional authority for increased loan limits has expired, January 1, 2014 saw a return to FHA’s pre-2008 process for calculating single-family loan limits, resulting in a decrease in the calculation of high cost area limits and the loan limit “ceiling” for any loan applications received or after January 1, 2014 through December 31, 2014.
So how does this affect you? What this means specifically for real estate sales in Palm Beach County, Miami Dade County and Broward is that the 2013 limits on FHA loans have been reduced. For all three counties, last year’s FHA loan limit of $423,750 is now $345,000 for 2014. This is an 18.6% decrease that will likely affect home sales, as fewer homes will qualify for the low rates and optimum conditions of an FHA mortgage.
Before you start writing your Congressman or Congresswoman, remember that this change doesn’t just affect our area—ours is, in fact, one of many. The only areas with real estate in the country that are not affected are Alaska, Hawaii, Guam, and Virgin Islands, where the costs of construction are factored in to increase the “ceilings” for all housing units sold.