This story was originally published in Builder.

Full-year 2019 real GDP growth is predicted to slow to 2.3%, down from 2018's projected 3.1%, due largely to the waning impact of the Budget Reconciliation Act, a widening trade deficit, and moderating business investment growth, according to Fannie Mae's Economic and Strategic Research Group.

Consumer spending should continue to be the largest positive contributor to headline growth amid consumer confidence that remains near an expansion best. However, business fixed investment growth, a critical driver of the current expansion, slowed significantly in the third quarter and may be further constrained in the near term by higher tariffs, trade uncertainty, and rising interest rates and input costs.

The most notable downside risks to the forecast include the ongoing trade tensions between the U.S. and China and stock market volatility, both of which have the potential to materially impact consumer and business spending.

Barring accelerating inflation, the ESR Group expects both mortgage rates and home sales to stabilize in the new year as the economy slows. Purchase mortgage originations should climb, but a more substantial decline in refinances is expected to result in a small drop in total origination volumes.

"We expect full-year 2018 economic growth to come in at 3.1% – an expansion high – before slowing markedly to 2.3% in 2019 and 1.6% in 2020," said Fannie Mae Chief Economist Doug Duncan. "Fading fiscal policy, worsening net exports, and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019."

Duncan continued: "The labor market continues to be one of the economy's high points, and with inflation hovering around the Fed's 2.0% target, we maintain our call that the Fed will hike rates once more in December and two more times in 2019, despite rising market expectations of fewer hikes amid stock market volatility. If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market. We also expect residential fixed investment to resume a positive growth trajectory amid continued rising housing starts and stabilizing home sales. However, affordability is likely to remain an industry concern, particularly among first-time home buyers."

This story was originally published in Builder.