Rates to Take Major Bite Out of Home Value Growth by 2020

December 4, 2018
Woman holding up January 2019 calendar
Photo: Unsplash/Brooke Lark

According to federally-backed lender Freddie Mac's two-year forecast, rising mortgage rates may cut annual home price appreciation rates in half by 2020.

The report anticipates annual home price growth will be 2.9 percent in 2019, down from 5.1 percent in 2018 and 7.2 percent in 2017. Additionally, Freddie Mac estimates the total amount of loans taken out for single-family homes will decrease by $30 billion. Says the report, "Almost all the trends in the U.S. housing market have been negative in recent months as housing market activity continues to adjust to higher mortgage rates," The Houston Chronicle reports.

As a result, Freddie Mac revised many of its estimates downward and stated, "If new-home sales are to resume growth in 2019, builders may have to shift their focus to more modestly priced homes and smaller homes to help offset housing affordability concerns."

While rising costs will make affordable homes a challenge, Freddie Mac said that modular housing, which can be built off-site, may help lower construction costs.

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