Despite recent economic stabilization during recent months, one industry expert says that a broader recovery will not be able to happen until the real estate industry gains ground.
Department of Housing and Urban Development Secretary Shaun Donovan made this claim on MSNBC's "Morning Joe."
"We've just been through the best winter of home sales in five years, really since the crisis began," Donovan said. "The number of folks in distress, the number of people who are delinquent in their mortgages, falling into foreclosure, [is] down dramatically. The number of new foreclosures is down by more than 50 percent since the president came into office."
However, he noted that a key area that continues to hold back a more rapid housing rebound are falling property values. While there are some local marketplaces that have experienced stability in recent months, key areas that were hit hard with waves of foreclosed houses now have deep shadow inventories that could take quite some time to work through.
Moving this shadow inventory is the key to stabilizing home prices, Donovan said, but he didn't reveal a timeframe in which he anticipates this to occur. However, in the wake of the housing market collapse, this inventory grew dramatically, causing a number of industry analysts to say it could take many years to sell off these excess properties.
To further assist current homeowners, Donovan also recently said on C-SPAN's "Newsmakers" that it is the Federal Housing Finance Agency's legal responsibility to assist underwater household through mortgage writedowns.
The Department of the Treasury announced that it could bear a portion of the cost to writedown mortgages backed by Fannie Mae and Freddie Mac, a move Donovan says in the green light implement such an initiative.
In recent years, the rapid decline on home prices coupled with a slow recovery throughout the housing industry, has created a lose-lose situation for a number of households. Donovan says that while some of them are saddled with negative equity, but are still current on their home loan payments, default is inevitable for some.
However, one major concern that continues to hold the FHFA, which oversees mortgage activity at Fannie and Freddie, from approving a principal writedown program, is the fear that a number of these severely underwater borrowers who are still current on their loans will strategically default to capitalize on such an initiative. This concern has been deemed "overstated" by a number of industry experts.