The maximum conforming loan limit for mortgages being acquired by Fannie Mae and Freddie Mac will be going up in most parts of the country in 2019, the Federal Housing Finance Agency has announced.

As a result of rising home prices, the maximum conforming loan limit will be higher in 2019 in all but 47 counties in the US, according to the FHFA. In most of the US, the maximum conforming loan limit for one-unit properties will be hiked to $484,350 in 2019, up from 2018’s $453,100.

The Housing and Economic Recovery Act (HERA) requires that the FHFA adjust the baseline conforming loan limit each year to reflect changes in the average US home price. According to the FHFA’s House Price Index (HPI) for the third quarter of 2018, house prices increased an average of 6.9% over the last 12 months.

The FHFA is also increasing loan limits for high-cost areas – areas in which 115% of the local median home value exceeds the baseline conforming loan limit. Under HERA, the maximum loan limit in those areas is a multiple of the area median home value, with a ceiling on that limit of 150% of the baseline loan limit.

According to the FHFA, median home values increased in most high-cost areas in 2018. The new ceiling loan limit for one-unit properties in most high-cost areas will be $726,525, which is 150% of the baseline conforming loan limit of $484,350.

The FHFA uses different loan-limit calculations for Alaska, Hawaii, Guam, and the US Virgin Islands. In these areas, the baseline loan limit for 2019 will be $726,525.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained +39 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the previous week.

Overview:  We had very strong manufacturing data but tame inflation.  The bond market made their gains on the back of the Federal Reserve as the top 3 Fed members (Powell, Clarida and Williams) made a point of telling the markets that the Fed's viewpoint is closer to their neutral rate than previously thought.  That caused a shift in trader sentiment to expect fewer rate hikes next year.

The Talking Fed: The Minutes from the last FOMC Meeting were released. Here are a couple of key highlights:
- Almost all Fed officials saw another rate-hike "warranted fairly soon." But The Fed discussed modifying language on "Further Gradual" hikes while expressing its greater reliance on incoming data.
- Only a "couple" (less than many, less than several, less than a few) participants noted that the federal funds rate might currently be near its neutral level.
- Members also noted that they are worried that companies might struggle to pass on rising input costs, from current or proposed tariffs, onto consumers and create detrimental inflation. 
Fed Chair Jerome Powell spoke at  the Economic Club of New York.  The markets zeroed in on his phrase that interest rates (the Fed Fund Rate) is "near" a Neutral rate.
Vice Chair Richard Clarida said that the Fed want's the smallest balance sheet possible but thinks it will remain above the pre-crisis size of less than $1 trillion. He also said that there is still room to hike rates before hitting their target "neutral" rate but that we are not far from it.
NY Fed President John Williams (the number 3 guy at the Fed) said that the Fed Funds rate is "not far" from the Neutral rate.

What to Watch Out For This Week: