A continued but modest rebound in the housing market and overall economy during the second half of 2014 are not likely to offset the sluggish pace of activity during the first two quarters of the year, according to Fannie Mae economists.

The economy is expected to grow approximately 3% in the second half of the year, but that's likely not enough to offset the first quarter, when the "economy experienced the worst performance in five years," and the second quarter, which experienced only "moderate pickup in growth," Fannie’s Economic & Strategic Research Group said in its July forecast.

Recent housing activity picked up seasonally as expected, but "many indicators remain near or below the levels for the same period last year," Doug Duncan, Fannie's chief economist, said in the July 23 release.

Total mortgage originations will decline 41% year-over-year and total home sales for 2014 are expected to decline about 2% from 2013, Fannie Mae projects. Meanwhile, total single-family mortgage debt outstanding is expected to rise slightly in 2014 "before strengthening further in 2015."

Fannie expects the acceleration in economic activity in the third and fourth quarters will be driven largely by consumer spending and, to a lesser degree, business capital investment and residential investment.

"Overall, our forecast calls for growth to come in at around 1.5% for the year, which would be the worst performance of Q4-over-Q4 growth in the current economic expansion," said Duncan. "On the bright side, real personal income grew for the fifth consecutive month in May and hiring has continued on an upward trajectory, which should help boost consumer spending during the remainder of 2014."

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