Sterne Agree chief economist Lindsey Piegza says that while the housing market continues to take steps in the right direction, the pace of the recovery remains muted.

From a demand standpoint, putting the recent volatility aside, resulting from the 2013 “taper talk” and the extreme winter weather at the start of 2014, home sales continue to improve from the lows of 2010, she says in a client note.

“Both from an investment standpoint and on a relative basis compared to the rental market, consumers continue to endeavor toward homeownership,” Piegza said. “Improving demand for housing is additionally fueling a modest improvement in supply. However, preferences for varying types of housing are shifting, particularly among the youngest generations, driving an increased demand for multi-family structures including condos and co-ops, as opposed to single-family homes.”

Piegza says that going forward, the housing market recovery will become more localized; those areas that experienced the most robust run-up continue to lag behind the national recovery, while those areas with a more limited benefit during the good times are now leading the recovery.

In each case, she says, the pace of the recovery will depend on local conditions including population growth, unemployment, and hiring.

“Of course, new demand on the national level remains somewhat stifled by rampant regulation that has aggressively moved away from the easy lending standards of the early 2000’s, now limiting access to credit. Furthermore, higher prices, while a benefit to homeowners and a sign of market improvement, are rapidly outpacing income growth and restraining would- be homebuyers, particularly first-time homebuyers, from entering into the market,” Piegza said.

One big takeaway? The era of the home as an ATM is pretty much over, despite the recent surge in HELOCs.

“From a macro perspective, although the housing market was the killer of the economy, it will not be the savior of the economy even as the market continues to improve simply because consumers are no longer using their homes as ATM machines to supplement spending,” she says.

The bottom line is, with further improvement in starts and sales, housing will remain a positive contributor to growth, but the contribution will be limited, likely half of what it once was.