Americans will have to wait a few more years for the housing market to return to "normal," an industry expert said Thursday.
"We're five years through a 10-year adjustment cycle," said Doug Duncan, vice president and chief economist at government mortgage giant Fannie Mae, who expects the housing market to stabilize sometime around 2015.
The path to stabilization, however, will be fragmented regionally, Duncan said, primarily along foreclosure and delinquency fault lines. "Two-thirds of households underwater are in 5 states," Duncan said, states which likely face more pain before any gains. "It's a very regional issue going forward."
As the impact of the housing crisis continues to reverberate through the country, the picture has changed. Where local and national housing markets were once virtually identical, they've now begun to diverge as employment prospects have changed in certain parts of the country.
While an oversupply of housing remains an obstacle for a housing market recovery, the lack of demand will be the more immediate issue going forward, Duncan says.
"There's been a focus on the supply side, but no one wants to buy. The level of application activity has been flat," he said. "From our perspective, it's really a demand problem going forward."
The incremental improvement the market has seen is largely thanks to investors, Duncan said, who can circumvent the mortgage minefield and pay for properties in cash.
Only a significant improvement in the jobs picture—to the tune of 300,000 jobs a month—will help drive lagging household formation, which has been on the decline for decades now, and drum up demand for housing. "We're expecting 150,000 [jobs added] tomorrow," Duncan said of the Labor Department's jobs report. "That's not robust enough to dramatically improve the employment picture."
How will we know we have a "normal" housing market again?
"I define it when construction returns to the level that would see additions to the housing stock to accommodate [demographic] growth," Duncan said.
Until then, the United States will likely remain plagued by too much supply and too little demand for housing.
"The headline on housing is [there will be] a little bit of improvement, but this is not the year in which housing is going to break out," Duncan added.