Despite an increase in home sales, the housing market continues to face "strong" headwinds due to tight credit conditions and high foreclosure rates, according to Federal Reserve governor Elizabeth Duke.
"Many of the existing homeowners who face payment problems are having trouble restructuring their loans and the backlog of foreclosed properties will likely take years to resolve," Duke told an economic forecasting forum in Raleigh, N.C.
She noted that "tighter standards" on government-backed loans and the shortage of jumbo loans are "likely to slow the housing recovery."
Meanwhile, the commercial real estate sector has been "hit hard" by business bankruptcies, job losses and vacancies, Duke said. CRE mortgage delinquency rates have "soared," she added. However, the Fed governor contends the CRE downturn is largely due to "poor business fundamentals" rather that overbuilding.
This suggests the performance of the CRE sector will "gradually improve as the economy continues to strengthen," the former Virginia community banker said.