Economists at Fannie Mae recently released their first economic forecast of 2013. The survey, titled “Transition to Normal,” describes where the direction the housing market is going will be affected by economic policy decisions being made and yet to be made by the federal government.

The forecast states that the Federal Reserve will not raise interest rates until the second half of 2015, which means long-term interest rates should increase very gradually for the next few years. In addition, the 10-year Treasury note yield will rise from its current level at 1.86% to 2% by the end of the year and 2.3% by the end of 2014. Mortgage rates are expected to increase to approximately 3.8% at the end of 2013 and 4.2% by the end of next year, according to Fannie Mae.

Citing the increase in demand for housing thanks to lower unemployment, Fannie Mae predicts that housing starts will increase by 23% this year to 950,000 units — the same increase as in 2012. Existing home sales are expected to reach nearly 6 million units by 2016.

As home sales, housing starts and home prices continue to increase, Fannie Mae foresees mortgage originations rising from $518 billion in 2012 to $642 billion in 2013, while refinance originations fall to $961 billion this year, compared to a projected $1.4 trillion last year. Outstanding mortgage debt, which declined an estimated 2.2% in 2012, is expected to fall an additional 0.8% in 2013.