As COVID-related restrictions continue to ease and stimulus-spending increases, full-year 2021 real GDP growth expectations improved to 6.8%, including 9.1% annualized growth in the second quarter, according to the April 2021 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group.

While there was a weather-related slowdown in February, economic activity picked up rapidly from that point on. This acceleration is expected to continue through the second quarter before tapering in the second half of the year. Due to the unprecedented nature of last year's pandemic-induced slowdown, risks to this part of the forecasted recovery remain elevated. Uncertainty still revolves around consumers' willingness to tap into the increased savings many accumulated during the pandemic, as well as their comfort level in returning to pre-COVID activities once restrictions are lifted.

Other risks to the economy’s positive trajectory include the widespread disruption in the supply chain, the pace of inflation, and both monetary and fiscal policy uncertainty.

"The ramp-up we'd previously forecast for the economy is underway, as evidenced by, among other measures, increasing airline passenger reservations and restaurant bookings," explains Doug Duncan, Fannie Mae senior vice president and chief economist. "Vaccinations are continuing to roll out, and consumers appear to be increasingly looking toward post-pandemic life.”

In terms of housing, while demand is still high and most markets are booming, the ESR Group revised its annual home sales forecast slightly downward. This is due to the continued lack of inventory to meet demand, as well as a slightly higher outlook for mortgage rates. That said, home sales and purchase mortgage originations in 2021 are still expected to rise 6.2% and 14.5%, respectively, year-over-year. Given the continued supply-demand imbalance, home prices are forecast to rise as well—by 8% in 2021, which is up from the previously forecast 4.2%. The FHFA Home Price Index predicts home prices to then decelerate to 2.9% annualized in 2022.

"An above-average pace of renters converting to first-time homebuyers is continuing, with many migrating into the suburbs from denser urban areas,” says Duncan. “However, strong consumer demand for housing continues to hit up against a lack of supply, limiting sales and bolstering home prices, which we expect will further compound affordability concerns in the months ahead as homebuilders also wrestle with input supply restraints."