As the whispers of housing reform start to grow into greater fruition, the topic of conforming loan limits is brought up as well.
In his latest blog, Jed Kolko, chief economist with Trulia, noted that the current system of conforming loan limits falls far short of reflecting the actual differences in local home prices and ends up favoring borrowers in lower-cost markets.
“The housing finance system – as well as other national housing policies – needs to serve a country where local home prices in some markets are 10 times as high as in others, and where local and state laws affect how much new construction is allowed, how long foreclosures take, and more,” Kolko said.
In the current system, the conforming system sits at $417,000. However, in 2008, the Housing and Economic Recovery Act granted “high cost area” higher conforming loans limits to reflect local price differences.
But as housing regulators markup the Johnson-Crapo housing finance reform bill on Tuesday, April 29, 2014, Kolko pointed just how the conforming loan limits fall short.
Using Trulia’s database of homes for sale, Kolko listed the top 10 housing markets with the highest share of for-sale homes above the local loan limit, showing just how out of touch conforming loan limits are.
10. Boston, Mass.
Currently, $470,350 is the conforming loan limit, while 30% of homes for sale are above the local loan limit.
9. Oakland, Calif.
Right now 30% of homes for sale are above the local loan limit, with the conforming loan limit sitting at $625,500.
8. New York, N.Y.
The conforming loan limit sits at $625,500 for New York, with 30% of homes for sale above the local loan limit.
7. Middlesex County, Mass.
The city’s conforming loan limit weighs in at $470,350, with 33% of homes for sale above the local loan limit.
6. San Diego, Calif.
So far, the city’s conforming loan limit is $546,250, with 33% of the homes for sale above the local loan limit.
5. Ventura County, Calif.
The conforming loan limited is $598,000, with 34% of the homes for sale above the local loan limit.
4. Orange County, Calif.
Orange County has a conforming loan limit of $625,500, with 38% of the homes for sale above the local loan limit.
3. Fairfield County, Calif.
In Fairfield County, the conforming loan limit is $601,450, and 39% of homes for sale are above the local loan limit.
2. San Jose, Calif.
This city posted a $625,500 conforming loan limit, with 43% of the homes for sale above the local loan limit.
1. San Francisco, Calif.
San Francisco posted that its conforming loan limit sits at $625,500. With a whopping 61% of the homes for sale above the local loan limit, it is the nation's most out-of-touch housing market.
