(RTTNews) - Cleveland Federal Reserve President Sandra Pianalto said Tuesday that while the housing market is beginning to show signs of recovery, it still has many problems that need to be fixed.

Speaking before the 11th annual Ohio Housing Conference, Pianalto said that it would take a “considerable amount of time for housing markets to fully recover.”

Pianalto said that the weak housing market and the weakened economy were tightly intertwined, adding that mortgage-related losses damaged the capital and wealth of financial institutions and homeowners.

“These problems led financial institutions to reduce lending to consumers and businesses, and induced consumers to curtail their spending,” she said in prepared remarks. “Weakness in the housing markets restrained the broader economy which, in turn, further weakened the housing markets.”

The Cleveland Fed chief did say that there have been some positive developments in the housing sector, as prices and sales levels have started to stabilize, and refinancing has risen 150 percent.

She added that the $8,000 home-buyer tax credit, which was recently extended through April 2010, has helped to spur home sales for first time buyers, who now account for three out of five home sales.

Pianalto’s comments come a day before the Commerce Department announces homebuilding activity for the month of October, and just as November data was released for the National Association of Home Builders/Wells Fargo housing market index, which remained unchanged at 17.

She added that the Fed could further help the housing sector by fostering stronger growth in the economy, which would increase consumer confidence, stabilize property values and lower unemployment.

Pianalto did warn, however, that the housing market and the broader economy still have a long way to go before they see a full recovery.

“Economic conditions have certainly improved since the beginning of this year, but resource utilization levels still remain low, bank lending is restrained, and credit terms are tight,” she said. “I expect our recovery to be a gradual and bumpy one.”

She later added that new strategies needed to be developed to “tackle wider housing challenges” persistent today and in the future.

“Regulation alone is not a panacea,” she said.

Pianalto concluded her speech by saying that it would take a collective effort in Fed monetary policy, banking and consumer protection regulation, and community development to restore housing markets, and in turn, restore the economy.

“However, the scale of the recession, the financial turmoil, and the focused impact of the crisis on many communities pose an unprecedented challenge to all policymakers,” she said. “While we certainly see ourselves as part of the solution, many partners and much time will be needed to heal these problems.”

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Posted in Categories: Economy, Forex, Releases, USA.

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