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14 Sam Khater spends his day ensuring that Freddie Mac's economics and research team delivers valuable insights and analysis on economic trends and policy issues affecting Freddie Mac and the housing market. With over 20 years' experience in housing and economics, Khater brings extensive housing finance research and expertise to his role to Freddie Mac, which he joined after 11 years at CoreLogic. At CoreLogic, his responsibilities included producing original research and advising clients, regulators, policymakers, and investors on real estate and mortgage market trends. Before joining CoreLogic, Khater was a senior economist at Fannie Mae and an economist at the National Association of Realtors. He holds a master's degree in network economics from Georgetown University and a bachelor's degree in economics and finance from George Mason University. What housing market trends do you see emerging in the second half of this year? ere are two key trends we're seeing in 2018. One is the rise of the first-time homebuyer. As the economy gets stronger and rates, as well as home prices continue to rise, many potential first-time homebuyers are realizing that now is the best time to jump into the market before it gets more expensive; especially since we see no end in sight regarding the increase in home prices. Another emerging trend that the market has experienced over the past year is the emergence of secondary and tertiary cities as hot housing markets that are beginning to see home-price growth accelerate. is trend has picked up mainly due to the growing unaf- fordability of the coastal markets and buyers are looking at these new markets to bridge the affordability gap. Some of the new markets that have seen exponential growth during the year include Denver, Provo, Nashville, and Austin. More recently, Reno and Boise have had a sharp run-up in home price growth. Do you see the headwinds related to affordability and inventory shortages continuing into the next year? Inventory shortage and the squeeze on affordability will continue to impact the market in 2019. e chronic shortage of inventory is the biggest hurdle the housing market and as an extension, the economy, is facing. I don't see that changing anytime soon. Despite home sales rising at a good clip on a year-over-year basis, the construction of new housing is barely above the recession level. We're just not building fast enough to keep up with the pace of demand, even though we are nine years into the economic expansion. e affordability squeeze is related to the shortage in supply. e inventory crunch is causing a consistent increase in home prices in the order of 5–6 percent, and that's well above approximately twice the growth in income, causing affordability problems particularly on the coasts. There has been a steady hike in mortgage rates since the beginning of 2018. Are you seeing these hikes impacting buyer sentiments? Consumer confidence has remained high despite rate increases. Looking at the demand for purchase credit and its growth rate, it's still roughly at the same level it was last year. e year-over-year increase in purchase applications that we look at quite closely has also been growing, indicating that rising rates have not impacted homebuyer sentiment. Freddie Mac recently published a study on how mortgage-rate comparisons can save money for borrowers. Can you share some of your findings? e key takeaway of this study was, for a typical $250,000 loan the expected savings from just one additional quote is about $1,400 for 80 percent of the borrowers who obtain mortgages. If you look at kind of the range of savings, a little over three-quarters of all borrowers who obtain ASK THE ECONOMIST HEAR DIRECTLY FROM TODAY'S LEADING MARKET EXPERTS. Sam Khater VP and Chief Economist, Freddie Mac The affordability squeeze is related to the shortage in supply. The inventory crunch is causing a consistent increase in home prices in the order of 5–6 percent, and that's well above approximately twice the growth in income, causing affordability problems particularly on the coasts.