An upward revision in GDP growth for the second quarter bolstered optimism at Fannie Mae for the rest of the year's economic track.
The mortgage giant's Economic and Strategic Research Group put out its newest outlook on Tuesday, calling for accelerated growth following the most recent news of 4.2 percent annualized GDP growth in the year's second quarter.
With data through June showing further upward revisions, the group believes second quarter growth could be revised even higher in the government's third estimate, which is scheduled to come out Friday.
"In our September forecast, we see the economy continuing to accelerate toward 3.0 percent growth in the second half of the year, in line with our prior forecast," said Doug Duncan, chief economist at Fannie Mae.
Duncan pointed to recent improvements in business spending, employment, and consumer confidence, all of which he hopes will help offset unexpected weakness in consumer spending.
On the other hand, the housing market is still struggling to find any real traction after going through fits and starts earlier in the year.
"Recent housing activity isn't quite as positive, having shown only lukewarm growth since a promising start to the third quarter, but our forecast is little changed from August," Duncan said. "Purchase mortgage applications have trended down over the past three months, despite the declining interest rate environment.
"We believe this suggests a residual conservatism on the part of consumers and supports our view that the pace of growth in the housing sector will be subdued during the remainder of 2014, with modest improvement in 2015," he continued.
For 2014, Fannie Mae's economists forecast $1.11 trillion in mortgage originations, a decline of 42 percent from last year. Production is expected to dip another 5 percent next year to an anticipated $1.05 trillion.
At the same time, the purchase side of the mortgage market is expected to gain more ground, reducing refinance share to 39 percent this year and 26 percent in 2015.
While the group says its projections could change in the next forecast, when it benchmarks its 2013 estimates to data recently released under the Home Mortgage Disclosure Act, they "expect the general market trends to remain valid."