The economic recovery in the U.S. has been “disappointing” – a direct result of the “out of balance” U.S. housing markets, the chairman of the Board of Governors of the Federal Reserve in the U.S. told more than 2,500 people at the recent International Builders Show in Florida.

“Many local markets have an overhang of empty and foreclosed homes, and many potentially creditworthy homebuyers cannot obtain mortgages,” Ben said. “The weak housing market also impairs homeowners’ financial health and diminishes the quality and stability of neighbourhoods and communities.”

Sustained, new policies to address “the many interlocking factors holding back the housing market” are needed, he said, although he didn’t go into any detail.

“The state of the housing sector has been a key impediment to a faster recovery,” said Bernanke. While the recovery in the U.S. is now in its second year and some job recovery is evident, “according to the most recent estimate, about one and three-quarter million homes are currently unoccupied and for sale.”

And “we estimate that about one-fourth of the excess supply of vacant homes for sale in the second quarter of 2011 was owned by creditors.”

While those numbers have declined slightly during the past few years, “a very large number of additional homes are poised to come on the owner-occupied market. In each of the past few years, roughly two million homes have entered the foreclosure process, and many of these homes have been put up for sale, crowding out much of the need for new building.”

He expects the foreclosures “to continue for a while, putting additional homes on the market and dislocating families and disrupting communities in the process.”

Foreclosures can diminish the values of nearby properties as well, he noted. And they can be neglected or abandoned which, in turn affects the quality of life in a neighbourhood.

Nationally, U.S. house prices have plunged about 30 per cent in nominal terms from their peak, and nearly 40 per cent in real, or inflation-adjusted, terms. “By some estimates, declines in house prices have reduced homeowners’ equity by more than 50 per cent in the aggregate since the peak of the housing boom, resulting in more than a $7 trillion loss of household wealth. Indeed, about 12 million homeowners – more than one out of five with a mortgage – are underwater, meaning they owe more on their mortgages than their homes are worth.”

That, in turn, affects consumer spending, creates a lower standard of living, reduces the incentives of firms to invest and hire, and reduces financial flexibility for homeowners. “Because some credit-worthy households find it difficult to obtain mortgage credit or to refinance, the strong actions taken by the Federal Reserve to put downward pressure on longer-term rates and to improve financial conditions have had less effect on the housing sector and overall economic activity than they otherwise would have had.”

Restraints on credit for home buyers and home builders alike continue to impede the housing and economic recovery, he said.

One solution is to turn many of those homes owned by creditors to rental – which has “some potential for success,” he said. Land banks, where government entities that have the ability to purchase and sell real estate, titles and accept donated properties, and other neighbourhood stabilization efforts “are just a few examples of the approaches that policymakers could consider to help facilitate the adjustment of the housing market.”