I agree with Paul.
I hope that everyone acknowledges that this GSE limit issue is not limited to California.
I do not know what statistical data shows, but base on first hand experiences in two major cities (NYC & Atlanta), the home prices would be well out of range to qualify for a conforming loan.
Why penalize an individual who worked hard to save up a nest egg for a 20% down payment with credit scores in the high 700s that pays every penny that person spent on his/her credit card bills every month.
Just because there are those of us who chooses to live in places like California, NYC, Atlanta, or other major cities, does that make us unAmerican and be denied of an equal opportunity of the American dream?

The reason it’s so high is that there is little land remaining and the rules and regulations to get permits are hugely time consuming and costly. Not uncommon to take 5 years to go thru permitting – I bet it doesn’t take 5 days in Podunk Ohio – because nobody wants to live there.

The fact that Calif sees ~500,000 more people every year is the reason why demand remains high and why owning land in Calif is so sought after. There is only one way for land prices to head unless Calif starts seeing lower population and nobody is expecting that. Any downturn has ALWAYS meant big price appreciation a few years later. The secret is to buy low and sell high. In Calif, that typically happens every decade.

And as some have suggested, why are there any caps on loans at all? Why not reward those of us with sterling credit? Why have any cap on it at all? Why would you give a deadbeat a cheap loan of $416,999 but make a creditworthy borrower wanting a $417,001 loan pay 20% higher interest rates (yes, that’s what 1% additional interest on a standard 5% loan actually costs)

In this crazy world, top notch, extremely low risk borrowers like me end up paying massive premiums over those who have no self control, who over extend themselves, who have no savings. And we have all too many nimrods making absurd comments without having the slightest idea what they yammer on about.

Rates should be based on your ability to pay and history of paying rather than the amount IMO. Many of the people that got these loans put nothing down, so when things got tough and values dropped, they bailed. But those of us who have those huge down payments in our homes will suffer value losses due to their ignorance or selfishness or lender deception or any combo thereof.
Again, the people that work hard and do the right thing get burned and end up paying the price for the irresponsible lenders and borrowers actions that caused these foreclosures across the nation. The borrower had nothing in it, where’s the incentive to work it out?
When you let someone buy a 800,000 dollar house with 5 grand down and they bail, the guy who put down 200,000 that took years and years to save gets royally burned by declining values caused by foreclosures.

Sad indeed.

That still makes is a luxury home!

This limit is a joke. It needs to be raised.