Mortgage Debt Reaches 10-Year High, FHFA Raises Conforming Loan Limits

Blog posted On December 04, 2018

The Federal Reserve announced outstanding mortgage debt totaled $10.2 trillion in the second quarter of 2018, up 2.7% from the previous year, and near the all-time high of $10.7 trillion set over a decade ago.  Although some may be wary of rising mortgage debt, when the economy strengthens and the population increases, total debt tends to rise.  Rather than worrying about the debt, economists urge consumers to look at both sides of the ledger, debt and assets.

National Association of Realtors (NAR) chief economist Lawrence Yun explains, the total value of homes in the US has increased from $18.6 trillion to $29 trillion.  Additionally, homeowners with mortgages are being more responsible with their debt.  Seriously delinquent mortgages, where homeowners are over three months late in payment or starting the foreclosure process are down to a 2.1% share, compared with the nearly 10% share of 2009.  The sale of distressed properties is only about 3% presently, down significantly from the 36% share ten years ago.

As the share of mortgage debt rises, so does total household debt, including mortgage debt, student loans, auto loans, and other debts.  Total household debt has almost doubled since 2009 from $59 trillion to $107 trillion.  Costs are rising, on everything, from homes, vehicles, tuition, etc.  Thus, this substantial increase in mortgage debt is not a cause for alarm, it is cyclical.

Last week, the Federal Housing Finance Agency (FHFA) announced it was raising conforming loan limits for the third time in three years.  In most US counties, the loan limit will increase from $453,100 to $484,350 in 2019.  In high-cost areas, including Alaska, Hawaii, Guam, and the US Virgin Islands, the loan limit will increase from $679,650 to $726,525. 

Like the NAR , the FHFA attributes the need to increase loan limits to rising home prices.  “As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2019 in all but 47 counties or county equivalents in the U.S.,” the FHFA said in a statement.

For a detailed breakdown of the loan limit increases in your county click here to access resource.

Sources: Forbes, HousingWire