The federal government is about to backstop mortgages of more than $1 million for the first time, a reflection of the steep increase in home prices in recent years, The Wall Street Journal reports.
Mortgages eligible for backing by Fannie Mae and Freddie Mac will rise to $1,089,300 in 2023 from $970,000 in high-cost markets in such states as California and New York.
There are about 100 counties out of a total of 3,000 in the U.S. that are designated as high cost.
For most parts of the country, backing of loans will apply to loans up to $726,200 from a 2022 maximum of $647,200, said the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.
The backstop should make it easier and less expensive for people to purchase single-family homes, as these mortgages will come with lower closing costs and smaller down payments than mortgages above those limits, known as jumbo mortgages.
Even so, the housing market has been cooling, as existing home sales have declined for the past nine straight months through October, according to data from the National Association of Realtors.
Mortgages hit a high of 7.08% in the last week of October, but have since slid down to 6.61%.
Despite these headwinds, housing prices have continued to climb, rising 8.6% in the third quarter from a year earlier, according to the realtors group.
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