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Although demand’s exploding and home prices are rising swiftly, analysts are anticipating a market moderation in the next year. According to new projections, the fluctuation is forecasted to start in 2019.

Analysts at Freddie Mac are anticipating appreciation will decelerate to 3.1 percent in 2019, with home sales to soften at a 2 percent growth rate and total 6.44 million. 2018, however, is anticipated to bear out as it has in recent years—fast-growing prices, which Freddie is pegging to rise 7 percent, and sales up 3.3 percent to a total 6.32 million.

What’s causing the cycle to shift? One factor is mortgage rates, which have risen steadily this year; in fact, Freddie predicts 30-year fixed mortgages will have an average 4.9 percent rate by the close of 2018, and an average 5.4 percent rate by the end of 2019. The average 30-year rate sits at 4.66 percent today.

Climbing costs are not a demand deterrent, however—and even with the change in market momentum, consumers are confident in the economy, which facilitates more spending, including on homes. Employment has gained meaningfully this year, hitting a milestone in spring, and the economy is expected to grow 2.7 percent, the analysts at Freddie project.

With the demand for homes not subsiding, a beef-up in inventory is necessary, says Sam Khater, chief economist at Freddie Mac.

“While this spring’s sudden rise in mortgage rates are taking up a good chunk of the conversation, it’s the stubbornly low inventory levels in much of the country that are preventing sales from really taking off like they should be,” Khater says. The underlying demand for buying a home is holding up, and will continue to do so, as long as the economy is generating solid job and income growth. Most markets simply need a lot more new and existing supply to cool price growth and give buyers enough choices.”

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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