The mortgage-finance company noted the latest jobs report showed steady year-to-date job creation and measures of consumer confidence are at or near recovery highs.
Furthermore, it said that despite a sharp increase in mortgage rates during the past two months, home sales have held up and home prices have continued to post gains, helping to keep the economy on a positive growth path this year.
"We continue to see growth in housing, partly due to an increase in existing home sales as buyers choose to act while rates remain near historic lows," Fannie Mae Chief Economist Doug Duncan said. "Consumer attitudes are improving amid a strengthening employment sector and we should begin to see a moderate pickup in consumer spending."
Fannie Mae said its forecast for July is little changed from last month. Overall, the company expects economic growth of 2% this year, but said further momentum later in the year should help carry growth in 2014 to an above-par pace of 2.6%, the strongest since 2005.
The company added it expects home mortgage rates to continue to rise gradually, averaging 4.7% in the fourth quarter of this year--about 0.4 percentage points higher than the number cited in its June forecast--but said the forecast of home sales is little changed, with expectations of an 8% rise in 2013.
Fannie also said that while the surge in mortgage rates hasn't significantly hurt purchase mortgage applications, it has led to a marked decline in refinancing applications, which is expected to continue next year.
Source: Wall Street Journal