This year is expected to end with lackluster economic growth, but economists are projecting a strengthening heading into the new year, due to forecasted consumer income rises, reduced fiscal headwinds, and a broadening housing recovery, according to Fannie Mae’s latest report from its Economic & Strategic Research Group.

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Fannie Mae Chief Economist Doug Duncan says economists expect the fourth quarter of this year to be weaker than the third quarter, but “we don’t see it as a sign of overall weakness.

“Although real consumer spending growth has disappointed this year, it appears poised to accelerate in November due to a significant jump in auto sales and a likely pick-up in home heating costs,” Duncan says. “The decrease in oil prices certainly may support consumer spending over time, particularly now during the holiday shopping season, as well as hold down inflation as a potential benefit to consumption.”

Fannie Mae has upgraded its forecast for 2015 from a projected 2.5 percent growth in the economy to 2.7 percent.

"Similarly, the housing market is likely to continue its gradual climb upward next year after a subpar 2014," says Duncan. "We anticipate a fairly strong increase in housing starts in response to stronger employment and some improvement in related household incomes. As a result, that may help to unfold some of the suppressed household formation numbers and incent builders to meet some of that increased demand.”

For all of 2015, Fannie Mae economists project that total housing starts will rise by about 22 percent and total home sales will increase by about 5 percent. They also project that total mortgage originations will tick up slightly to $1.13 trillion.