The changes created by tax reform will be a mixed influence on housing as consumers will have more to spend to buy a property, but lose other benefits of homeownership.

The Tax Cuts and Jobs Act provided "a shot in the arm for an expansion that, while long in the tooth, likely brought the best full-year performance during 2017 in three years," said Fannie Mae Chief Economist Doug Duncan in a press release.

"The question for 2018 is less about the impacts of the tax cuts for consumers and corporations than about how the Fed manages the pace of monetary policy normalization amid a simulative fiscal environment."

Fiscal policymakers need to concentrate on managing a soft landing for the economy this year, as using an aggressive monetary policy to slow down an overheating economy will do more harm than good.

Fannie Mae origination projections

"Additionally, the new tax laws are likely to motivate a mixed response in the housing market: Increased disposable household income should lead to greater housing demand, but changes to deductions essentially reduce the subsidy for homeownership," said Duncan.

"On balance, we expect the housing market in 2018 to encounter many of the same challenges as last year, including inventory shortages, particularly in the middle and lower end of the market, and affordability headwinds."

His origination volume projection for the full year is unchanged from December at $1.73 trillion, but Duncan reallocated the estimates for each quarter.

The forecast for the first quarter is now $366 billion, up from $363 billion and the second quarter is at $483 billion, up from $482 billion.

But the third and fourth quarters are now projected to be slower at $466 billion and $415 billion, respectively, compared with $468 billion and $418 billion in December's forecast.

Duncan also upped his estimate for 2017 volume to $1.83 trillion from $1.81 trillion, after increasing the third-quarter origination totals to $477 billion from $473 billion and the fourth-quarter estimate to $453 billion from $439 billion.

The change in the fourth quarter reflects refinance activity ($167 billion from December's $156 billion) but there was also higher purchase volume ($286 billion from the previous $283 billion) as well.

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