The Federal National Mortgage Association, Fannie Mae, and the Federal Home Loan Mortgage Corporation, Freddie Mac, are about to start backstopping million-dollar mortgage loans. The rationale rationalization for this is that the jump is a

reflection of the rapid appreciation in home prices nationally over the past year.
The increase may make it easier and cheaper for some borrowers to buy a home….

But such a move only creates a vicious circle of rising prices into an already growing bubble.

But, but—Steve Walsh, President of Scout Mortgage in Scottsdale, AZ, says,

Housing prices are expensive. I don’t believe these people are looking for a castle, just a three-bedroom house with a backyard[.]

Well, NSS. How does Walsh think those prices for what used to be an ordinary home got to be so high?

There’s this bit on that:

By law, the loan limits are updated annually using a formula that factors in average housing-price increases nationwide.

Nothing like building in guaranteed inflation.

One way to slow the growth of this housing bubble would be for the Federal government to stop guaranteeing such high prices and price growth through its mechanism of guaranteeing or otherwise backing such enormous loans and loan growth.

Granted, that would be hard for the Feds to achieve, since the folks who can afford such enormous prices are the largest donors to Government’s politicians. However, “hard” means “possible.”