Rising interest rates coupled with increasing home prices discouraged home buying activity during the third quarter, according to Freddie Mac’s latest forecast.
“The housing market continued to cool off in the fall with slowdowns in home sales, new construction and price growth,” Freddie Mac Chief Economist Sam Khater said in a release. “While we expect the weakness in housing activity to extend the next few months as the market absorbs the recent uptick in mortgage rates, the combination of strong economic growth and millennials moving toward homeownership should help home sales regain momentum and rise modestly in 2019.”
Freddie Mac said mortgage rates remained steady at 4.6 percent for the third quarter until the weekly average rate reached a seven-year high at 4.9 percent at the beginning of October. Freddie Mac forecasts the 30-year fixed-rate is expected to average 4.5 percent in 2018, rise to 5.1 percent in 2019 and to 5.6 percent in 2020.
Additionally, Freddie Mac believes home price appreciation will be 4.6 percent in 2019 and slow to 2.9 percent in 2020.
The forecast predicts total home sales (new and existing) will decline modestly this year to 6.07 million, increase1.8 percent to 6.18 million in 2019, and rise1.1 percent to 6.25 million in 2020.