Highly Competitive Boston Housing Market Gets Higher Loan Limits in 2016

The Boston housing market remained fiercely competitive throughout 2015, leading to higher home prices across the metro area. This in turn brought higher loan limits in 2016, for both FHA and conventional mortgage loans. The question is: Will the Boston housing market remain hot through 2016, or is a cooling trend in store?

One of the Most Competitive Housing Markets of 2015

At the end of 2015, the real estate firm Redfin created a list of the most competitive neighborhoods in the U.S. for home buyers. They evaluated cities and neighborhoods across the country, with an eye out for trends that reveal competitiveness.

According to a company blog post, they considered “the percentage of homes that sold above asking price, how quickly homes went under contract and the percentage of Redfin offers that faced bidding wars.”

Surprisingly, the 30 most competitive neighborhoods in the nation were all located within one of four cities — Boston, Portland, San Francisco and Seattle.

Within the Boston metro-area housing market, the fiercest competition was found within the following neighborhoods:

  1. Inman Square (in Cambridge, MA)
  2. Brighton / Allston (in Boston)
  3. Springhill (in Somerville, MA)
  4. Cambridgeport (Cambridge)
  5. Powder House (Somerville)
  6. Neighborhood Nine (Cambridge)
  7. Washington Square (in Brookline, MA)
  8. East Arlington (in Arlington, MA)
  9. North Cambridge

Homes in these areas have been selling much faster than the national average, and with multiple offers and even bidding wars in some cases.

Katie Gustafson, a Redfin real estate agent who works in the Boston area, said multiple offers are common, particularly in the red-hot Cambridge housing market. “It’s incredibly rare for a home in Cambridge not to get multiple offers. Offering over list price, waiving contingencies — buyers are doing everything they can to compete,” she said.

These kinds of conditions are great for sellers, but they can make life harder for home buyers. To secure a property in such a hot market, buyers must make strong offers — in some cases above the asking price. This is largely why house values in the Boston area have risen so much over the last year.

Boston Borrowers Get Higher Loan Limits in 2016

Home prices in this metro area rose so much in 2015 that the Federal Housing Finance Agency (FHFA) decided to increase Boston’s conforming loan limits for 2016.

Last year, the conforming loan limit for a single-family home in the Boston-Cambridge-Newton metro area was $517,500. That limit was raised to $523,250 for 2016, according to LoanLimits.org.

The maximum insurable amount for an FHA home loan was also increased for 2016, and it now matches the conforming cap mentioned above. Between now and the end of the year, the FHA loan limit for a single-family home in the Boston metro area is $523,250. These limits are reviewed annually.

Local Home Prices to Increase 24% by 2020?

According to the real estate information company Zillow, home prices in Boston rose by double digits last year. The Zillow Home Value Index (ZHVI) for this area rose by 10.4% over the last 12 months or so. But the rate of appreciation could slow down in 2016 — the company has predicted a gain of only 2.9% over the next 12 months.

Related: Boston home prices hit new peaks

Despite a potential cooling trend, home prices in the Boston real estate market will likely continue rising for the foreseeable future (i.e., the next few years). A recent report by Standard & Poor’s estimated that home prices in the city could rise by 24% between now and 2020.

Disclaimer: This story contains forward-looking statements relating to the Boston housing market. Such statements were made by third parties not associated with the Home Buying Institute. The publishers of this website make no claims about future home prices or other housing-related trends.