What the 2016 Federal Loan Limits Mean for Builders
In December 2015, the Federal Housing Administration released its 2016 loan limits. High-cost counties throughout the country saw loan limits increase due to rising costs, while the limits in other counties remained the same.
Rising costs of purchasing a home, low interest rates (though interest rates are on the rise) and overall market confidence ushered in these increases. Will a change in loan limits have an impact on your home building business? If so, will that impact be positive or negative? Continue reading to find answers to these questions and more.
What are the 2016 federal loan limits?
There won’t be loan limit reductions anywhere in the country, which is good news for buyers and builders alike. The maximum mortgage amount for FHA-insured single-family loans in high-cost metropolitan areas will remain at $625,500. The current loan limit for areas with relatively low housing costs will also stay at $271,050.
Where are the federal loan limits being raised?
Many of the 188 counties that will receive increases in FHA loan limits are clustered around the Seattle, Denver, Nashville, and Boston metro areas.
For example, if you’re building new construction homes in the Denver area, your potential buyers will receive the largest increases in loan limits: Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson and Park counties all saw their maximum conforming loan limits rise $34,500. The federal loan limit in these counties is now $458,850 for 2016. Boulder County also got an increase of $18,400, bringing their limit to $474,950. Now, more buyers will be able to secure loans that are large enough to cover the cost of a home in these higher-priced areas.
Experts say new home prices will keep going up
In many ways, today’s real estate climate has created the perfect storm for rising costs of new construction. On the business side of things, labor is getting more expensive and there’s a shortage of skilled contractors. Demand is also rising, especially in markets like Denver that are exploding in popularity. Rent throughout the country is also rising, making the purchase of a new home more financially feasible than it has been in years. Interest rates continue to stay relatively low as well.
Builder confidence for 2016 is soaring
Builder confidence is up, and for good reason. In the United States, more than 6 million homes are expected to sell in 2016. That’s the highest number in ten years, and if builders can keep up with the demand, it’s great news for their businesses. The new, higher FHA loan limits in growing regions like Colorado, California, Washington and Tennessee are great news for builders in those areas, because more people will be able to afford homes in increasingly expensive areas. Essentially, 2016 is an excellent time to get that new construction project underway.
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