When HUD slashed FHA loan limits in 652 high-cost U.S. counties in January, suddenly many builders found their homes priced too high for the government-backed loan program, popular with borrowers who don’t have 20 percent to put down on a home purchase.

Builders facing reduced demand are slashing prices in markets like Phoenix, Las Vegas and Sacramento, Bloomberg News reports.

“When you take the FHA limit down to $271,000, you hit us right in our sweet spot,” Buddy Satterfield, president of the Arizona division for Shea Homes, tells Bloomberg’s Prashant Gopal. Last year FHA would back loans of up to $346,250 in the Phoenix market. Source: businessweek.com.

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