Recent hurricanes appear to have dragged down home sales, which were already suppressed by lean inventory.
The full-year 2017 economic growth forecast remains unchanged at 2.2 percent following expected offsetting hurricane-related impacts to GDP growth in the third and fourth quarters, according to the Fannie Mae Economic & Strategic Research Group.
In the third quarter, consumer spending growth weakened and residential investment declined sharply, partially offset by gains in business equipment investment, inventory investment, and trade.
ESR Group expects economic growth to moderate to 1.8 percent, with upside risk from potential tax reform and downside risk from restrictive trade policy and geopolitical tensions.
"The impacts from this season's hurricanes on the U.S. economy were wide-ranging but should dissipate over time. These include the loss of momentum in consumer spending and residential investment, as well as a decline in September payrolls and August home sales and contract signings," said Fannie Mae Chief Economist Doug Duncan. "We expect economic activity to rebound in coming months. The recovery will likely be slower for home sales and home building, however, as the labor shortage and rising material prices will likely worsen after the hurricanes, exacerbating already-tight inventory."
Duncan said he expects total home sales will be flat this year compared with the moderate rise that had been predicted. He said he expects the Fed to raise rates for the third time this year in December.