A few weeks ago, the Federal Housing Finance Agency (FHFA) announced updated conforming loan limits for 2022.
There was a time when conforming loan limits would not move at all from year to year. Today, not only does the FHFA want to keep up with inflation, but they also want to keep up with the actual housing market.
Thanks to surging appreciation throughout the country’s real estate markets, the FHFA has once again bumped conforming loan limits significantly.
New Loan Limits
In 2019, high-balance conforming loan limits in the county of Los Angeles sat at $765,600.
At the conclusion of 2020, those limits were bumped to $822,375 for 2021. I wrote about this last December to discuss how it would net $70,000 in additional purchasing power, which was significant to the home marketplace.
For a refresher, read the old blog post to dive deeper into increasing conforming loans: “New Conforming Loan Limits Offer Upside to Specific South Bay Markets”
So, what was the bump this year?
2022 high-cost conforming loan limits will increase to $970,800.
That is a HUGE jump!
This increase is due to the FHFA working to keep up their Housing Price Index which is up just over 18% on the year.
The Calculated Benefits
If you re-read last year’s blog, then you know conforming loan limits normally offer the best rates with a 20% down payment.
Oftentimes, jumbo loans require 25%, 30% down, or more to qualify and the rates are slightly higher. To be fair, and a recent development over the past couple of years, banks have made jumbo loans more desirable/achievable which has helped to fuel our South Bay markets – in turn, making conforming loans not quite as impactful as in the past.
That said, if a home market previously was higher than current conforming loan limits but now qualifies, it is possible to see a near term bump in prices thanks to the newfound financing that is almost unbeatable.
Below are the calculations…
- 2021 Buyer:
- 20% down payment + max $822,375 loan = $1,027,968 purchase price
- 2022 Buyer:
- 20% down payment + max $970,800 loan = $1,213,500 purchase price
Last year, I thought $70,000 in net buying power was significant.
This year, high-cost conforming loan limit increases offer a whopping $185,000 in additional buying power.
Sub-Markets that Benefit Most
How do you find South Bay sub-markets that will be able to benefit most?
Simple.
Look for sub-markets that have their top-of-market sale prices around $1,027,968. Thanks to the bump in conforming loan limits, there is now a path of easier resistance to $1,213,500, offering a nice window to fuel a short-term run.
Manhattan Beach Blvd. Condos
While there are so many condo/townhomes in Manhattan Beach well beyond conforming loan limit levels, there are still pockets located on Manhattan Beach Blvd. that will benefit from this change.
Below are two condo/townhomes sales around Manhattan Beach Blvd.:
- 1461 Manhattan Beach Blvd. #B
- 2 beds, 2 baths, 1,299 sq. ft.
- Sold Price: $1,050,000
- 1427 12th Street #1
- 2 beds, 3 baths, 1,335 sq. ft.
- Sold Price: $1,090,000
The final sale prices of these units are primed to take advantage of higher limits. Could be a nice bet.
North Redondo Beach Townhomes
North Redondo is known for its high concentration of condos/townhomes, so there are a multitude of options. I do find that there are quite a few properties that are located around Grant Avenue or nearby to Inglewood Avenue that are right around $1,025,000.
Below are some examples:
- 2705 Gates Avenue #A
- 3 beds, 3 baths, 1,636 sq. ft.
- Sold Price: $1,037,000
- 1814 Grant Avenue #7
- 3 beds, 3 baths, 1,746 sq. ft.
- Sold Price: $1,026,000
- 1729 Ruxton Lane
- 4 beds, 3 baths, 1,711 sq. ft.
- Sold Price: $1,020,000
- 2602 Mathews Avenue #C
- 3 beds, 3 baths, 1,697 sq. ft.
- Sold Price: $1,020,000
These are just a small fraction of options that will work. North Redondo Beach as a whole will truly benefit from these new loan limits.
The Village in South Redondo Beach
If you know the large building complex off Catalina Avenue, then you know “The Village” condominiums. Some of the top-end two-bedroom units will surely benefit from the new loan limits.
Take a look below:
- 140 The Village #107
- 2 beds, 2 baths, 1,330 sq. ft.
- Sold Price: $1,050,000
- 120 The Village #310
- 2 beds, 2 baths, 1,257 sq. ft.
- Sold Price: $1,050,000
It is tough to make new highs in condo complexes, but the FHFA changes will help push some of these condos even higher.
“Top-of-the-Hill” PUDs in Rolling Hills Estates
There are not a lot of options deeper into the Palos Verdes Peninsula but there is a pocket of PUDs that might enjoy the benefits of high-cost loan limits.
See below:
- 9 Cypress Way
- 3 beds, 2 baths, 1,590 sq. ft.
- Sold Price: $1,069,000
- 30 Cresta Verde Drive
- 3 beds, 3 baths, 1,992 sq. ft.
- Sold Price: $1,035,000
- 92 Aspen Way
- 2 beds, 2 baths, 1,590 sq. ft.
- Sold Price: $1,050,000
Areas like Eastview were on the list last year and had an amazing run this year. If you are looking for a single-family home, then the Rancho Palos Verdes/San Pedro pocket of Eastview will enjoy benefits in addition to the above PUDs.
Torrance, Torrance, Torrance
As a no brainer last year, outside of my normal blog coverage, you must watch housing in the city of Torrance.
There are so many Torrance housing options between $1 million and $1.1 million that will allow this South Bay city to continue to roar. It is the perfect storm of higher loan limits, affordability, and Torrance offerings that will push this market higher.
Conclusion
It has been well-documented how interest rates and loan programs can fuel the real estate market to higher prices.
If you are a buyer considering homes around the $1 million mark, then you are in a great spot to benefit from updated high-cost conforming loan limits to push values higher thanks to newfound buying power.
If you are a considering selling a property valued around $1.025 million, then it might behoove you to sit on the property for another year or two. There is a chance that prices can outperform higher thanks to conforming loan limits offering better rates and down payment options for your asset. It might pay to be patient.
Have a great weekend!
Cheers.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]