The VA loan limits for 2014 were announced in late December and the new numbers have created some confusion as to how they have been calculated.  In 2013, the VA loan limit was $750,000 for Oahu (and slightly higher in 2012). For 2014, it has dropped to $625,500.

This loan limit decrease seems quite odd, because all signs point to a housing market recovery and increasing home prices.

  • The Honolulu Star-Advertiser cover article for Tuesday, January 7, 2014, “Modest increase in market sets record high prices,” indicates that 2013 closed with record high median sales prices and forecasts higher prices for the future:

Last year was a record year for Oahu’s housing market, as the median price for single-family houses and condominiums reached new highs. Yet, the growth was a relatively modest 5 percent, which economists predict will pale in comparison with much stronger gains this year and beyond. (Gomes, 2014)

Why did this happen?

  • The VA calculates it’s “high cost” county limits directly off of the U.S. Department of Housing and Urban Development’s (HUD) published Median Sales price for the year in each county.
  • The VA county limit for all Hawaii counties is 125% of the median price.  Last year, the median price was $600K for Honolulu, so the limit was $750,000.
  • Earlier in December, HUD released its new limits for 2014 which were also lowered.
  • HUD also released its median sales price data. The surprise is that they calculated the median sales price for Honolulu as $450,000, a 25% DECREASE from the previous year.  Supposedly, that number is calculated based off of all the non-distressed one unit residential home sales from January 1 through August 31 of 2013 (the median includes both Single Family Residences and Condo sales).

What are we doing about it?

  • None of the trends that we can observe show Hawaii home prices declining.  Therefore, we plan on appealing the numbers.
  • The U.S. Department of Housing and Urban Development (HUD) has published information about an appeals process.  There are two “letters” that describe the process, some of the information is a bit contradictory and it’s not clear if an appeal can even be performed at all; it depends upon the data that HUD already has for the county.  However, the deadline is January 31, 2014.
  • We are in the process of gathering all the applicable sales information for submission to HUD.

Hawaii VA Loans will post an update as soon as the process is completed. We are keeping our fingers crossed for a positive result. Our VA loan specialists are ready to answer any questions you may have about your VA home loan benefits.