Housing to drag on Q3 economic growth, says Fannie Mae

Fannie Mae maintains its growth forecast for the quarter

Housing to drag on Q3 economic growth, says Fannie Mae

Housing is expected to once again be a drag on economic growth in the third quarter despite potential positive contributions from an inventory restocking, according to the September Economic and Housing Outlook released by Fannie Mae.

Fannie Mae maintained its third-quarter economic growth forecast of 3.2%.

Fannie Mae Chief Economist Doug Duncan said there has been a softening in some prices of construction materials. This should help builders continue constructing smaller or less expensive homes most in demand from potential first-time homebuyers. Duncan also expressed hope for an improvement in the housing market in 2019 with the crunch on for-sale inventories of existing homes easing slightly.

However, Fannie Mae said that in the near term, the lack of housing inventory, particularly at the lower end of the price spectrum, continues to restrain home sales and support home price appreciation.

“In the second quarter, we marked the ninth anniversary of the current economic expansion; however, it’s also likely that we marked its high point,” Duncan said. “On the whole, macroeconomic fundamentals remain strong, but signs increasingly point to a softening of third-quarter real GDP growth as trade resumes its role as a drag on GDP, and consumer and business demand growth retreat from previous highs. We expect full-year 2018 growth to be the best of the expansion before slowing next year as fiscal stimulus runs its course. The labor market remains solid, and with inflation continuing to straddle the Fed’s two-percent target, our call for two more interest rate hikes in 2018 is unchanged.”

Fannie Mae also maintained its full-year growth forecasts of 3% and 2.3% for 2018 and 2019, respectively.

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