Economic growth remains on-track to hit Fannie Mae’s 2018 projected growth rate of 3 percent, and meet its 2019 forecast of 2.3 percent, despite expectations of slightly stronger third-quarter growth than in the prior forecast, according to the Fannie Mae Economic and Strategic Research Group’s October 2018 Economic and Housing Outlook.

Residential fixed investment is expected to have fallen for a third-consecutive quarter, with home sales and mortgage demand continuing to soften amid rising interest rates.

“Our expectations for housing have become more pessimistic: Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019,” said Doug Duncan, chief economist for Fannie Mae.  “Meanwhile, affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market. While the amount of for-sale inventory of existing homes is finally showing some improvement, it remains tight in many areas of the country, especially in the lower-priced tiers."

The Research Group still anticipates that growth slowed from the second quarter's robust 4.2 percent annualized rate to a still-strong 3.3 percent pace. Factors that could have slowed third-quarter growth include a quarter-over-quarter deceleration in consumer spending and business investment growth, as well as trade, which switched to a detractor from growth, rather than a source of growth.