The January outlook now calls for 1.1% gross domestic product growth, rather than a 0.4% decline in 2024. That is because this month's spending data "was pretty gangbusters on the consumer side," said Doug Duncan, the government-sponsored enterprise's chief economist.

However, "there's still a bunch of other indicators that we're watching that do suggest a recession. The yield curve's still inverted [but] it's getting closer to flipping," he pointed out.

The Fannie Mae economists had been predicting the U.S. was heading for a recession with the April 2022 forecast, but it kept changing the timing of when it would start.

There have been 21 consecutive months of declines in the leading economic indicators, such as the monetary aggregates which have gone negative.

But the U.S. economy is also benefiting still from the Chips Act and the Inflation Reduction Act working through the system, "and the congressional estimates turned out to be massively low relative to the actual impact of those from an aggregate financial perspective. So they've provided some support on the macro side as well," Duncan said.

So in doing a plot of the GDP numbers, "what you will see is the downturn just isn't as deep as was to get a mild recession," he said.

The Federal Reserve's pivot, ratified by the bond and stock markets, also played a part, said Mark Palim, Fannie Mae's deputy chief economist.

"On balance, the economy's not going to slip into recession," Palim said.

Geopolitical risks can affect the forecast, and right now three hot spots exist: between Russia and Ukraine, in the Middle East and between China and Taiwan, Duncan noted.

But Defense Department expenditures could be a positive for GDP growth, he said.

Meanwhile, the spreads between the 10-year Treasury yield and rates on the 30-year fixed mortgage should narrow in the next two years, Duncan said.

Optimal Blue's data put the spread at 258 basis points on Jan. 19, down 20 basis points over a four-week period. But it is still wider than the norm, somewhere between 150 and 200 basis points.

Fannie Mae brought its projections for the 30-year FRM to 5.8% for the fourth quarter and 5.5% for the same period next year. Its average for the 10-year both years is 3.8%.

So a driver of the rate decline will be spread compression, Palim said.