This story was originally published in Builder.

The Fannie Mae Economic and Strategic Research (ESR) Group in its February forecast update is maintaining its prediction for 2.2% full-year growth in 2019, down from 3.1% in 2018, the GSE said Thursday.

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, Fannie said.

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%, 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.

"We reduced first quarter growth expectation slightly, but our forecast for full-year 2019 growth remains unchanged," said Fannie Mae Chief Economist Doug Duncan. "The labor market is strong, unemployment is at a very low level historically, and wages are rising modestly, enticing workers to come off the sidelines. We continue to expect only one rate hike this year as markets applauded the pause in monetary tightening by the Fed. Uncertainty regarding terms of trade remains a downside risk, as does slowing global economic growth."

"On housing, a reduction in our forecast of existing home sales has our team projecting fewer 2019 purchase mortgage originations," Duncan continued. "However, falling – or at least not rising – interest rates, strong employment, continued wage growth, and a deceleration in home price appreciation should support more favorable home-buying conditions heading into the spring, along with improved affordability."

This story was originally published in Builder.