The first half of this year performed a lot better than what was originally expected, giving extra momentum to the start of the second half of the year.

“Our second-half outlook is little changed overall, but we have upgraded our full-year outlook due to the upward revision to first-quarter GDP and our more optimistic view for the second quarter,” said Fannie Mae Chief Economist Doug Duncan in Fannie’s July Economic Report.

“We believe consumer spending will be the largest contributor to growth for the remainder of the year, particularly as consumers’ confidence, household net worth, and income growth prospects have continued to strengthen amid an improving jobs market,” Doug continued.

Economic growth is expected to pick up to 2.8% annualized in the second quarter—0.4 percentage points stronger than the June forecast—thanks to improved consumer spending and residential and nonresidential investment, along with a waning drag from net exports.  

Although volatile economic conditions abroad pose potential headwinds to 2015 growth expectations, Fannie Mae’s Economic & Strategic Research adjusted its full-year 2015 economic growth projection to 2.1%, up from 1.9% in the prior forecast.

"The drop in oil prices will likely continue to weigh on nonresidential investment in structures, and on balance we expect net exports to be a drag on growth this year, due in large part to the debt crisis in Greece and deteriorating economic conditions in China,” Duncan said.

Duncan noted that Fannie’s housing forecast remains largely unchanged, with leading housing indicators pointing to continued improvement heading into summer.

“We expect to see strong sales, lean inventories, and rising confidence through the rest of the year, which should support increased home building activity and give an added boost to economic growth. Although a lack of skilled labor may hurt construction activity, our forecast calls for housing starts to average 1.12 million units,” he said.

Existing and new home sales are expected to climb by approximately 5% and 25%, respectively, and total mortgage originations to rise approximately 24% to $1.46 trillion, with a refinance share of 47%.