Fannie Mae Holds 2019 Forecast Steady at 2.2 Percent Growth and One Fed Rate Hike

But the Fed's dovish shift is expected to help housing and broader economic conditions

The Fannie Mae Economic and Strategic Research (ESR) Group in its February forecast update is maintaining its prediction for 2.2 percent full-year growth in 2019, down from 3.1 percent in 2018. A smaller boost from previously enacted federal fiscal policies, moderating business investment growth, and a widening of the trade deficit were listed as key drivers behind the expected year-over-year decrease in headline growth. Slowing global economic growth and trade uncertainty remain downside risks. Federal Reserve “patience” has led to easing financial conditions, while the expanding labor pool suggests minimal wage pressures, which together serve as potential growth offsets to the opposite direction.

The ESR Group’s housing and mortgage finance forecast calls for total home sales in 2019 to be essentially flat from 2018. Decelerating house price appreciation plus a slowdown in interest rate increases should provide some support for sales after the decline of last year.

Growth for the first quarter of 2019 was revised downward from the previous forecast by one-tenth to 1.7 percent, due to expectations of a slight slowdown in consumer spending on degraded consumer sentiment. The ESR Group expects that any impact on growth from the partial government shutdown will be mostly recouped by the end of the first quarter. The dovish tone of the Fed’s most recent statement and its removal of forward guidance on interest rates, with no evidence of accelerating inflation, support the ESR Group’s expectation for a single mid-year rate hike in 2019.

Visit the Economic & Strategic Research site to read the full February 2019 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.