Washington — That spark housing was providing to a sluggish economic recovery? Well not so much anymore, according to Bank of America Merrill Lynch economist Michelle Meyer.
In a report Tuesday titled "The long and winding road," Meyer noted that consumer confidence has lifted home prices and sales. But political wrangling and the expected pullback of Federal Reserve stimulus are combing to create uncertainty.
"Greater uncertainty coupled with higher mortgage rates, supply constraints in the homebuilding industry and disappointing household formation through the summer has prompted us to recently lower our forecast for housing starts," she wrote. "We are now looking for housing starts of 930,000 this year, down from our prior forecast of 975,000.
Economists at Bank of America, however, still think home prices will rise 11.8 percent from the final three months of 2012 to the final three months of this year.
Still, the combination of drags on housing is likely to push off further into the future a brisker recovery in the key sector.
"Momentum is taking a longer to build than originally anticipated," said Meyer.