The Top 4 Challenges for Housing Recovery - When the housing market was booming a few years ago, there were several factors that contributed to its rise. Likewise, now that the market is trying to recover from the worst recession since the Great Depression, there are many hurdles that stand in the way. No one can deny that the housing market is steadily improving, but still faces an uphill battle. So what are the major challenges for housing recovery? Economists say these are the top 4 hurdles:

1. Builders can't get loans fast enough
In almost every major metropolitan area in the country, there are more buyers wanting to purchase a home than there are existing homes for sale. That lack of inventory and increased demand has made home prices go up in recent months. As a result, builders have seen an opportunity to make a lot of money. They can take advantage of the increased demand for affordable housing by building new homes. The problem? Many builders are having trouble getting access to construction loans, and until lenders give them the money they need, the lots they were hoping to develop sit empty. This is not only frustrating for the builders themselves, but for prospective buyers too.

2. A flawed appraisal process
Nothing can ruin a home sale quicker than a low appraisal. If an appraiser estimates the home is worth less than the agreed-upon selling price, a buyer or seller will often try to renegotiate the deal, or call it off altogether. After all, a low appraisal will lead to a lender reducing the amount of money it is willing to give out to a borrower. Appraisal systems vary widely from state to state, and many lenders do business in multiple states. Since there currently isn't a universal set of appraisal reforms or practices, the situation is even more complicated. The National Association of Home Builders has proposed a universal set of rules, but until policymakers agree to those changes, the appraisal system will have some flaws.

3. A low supply of building materials
When the recession hit a few years back, companies across the country had to cut back on production and reduce their workforces. Building material manufactures were no exception, and many drywall producers and lumber firms closed their plants altogether. Now, the supply chain is starting to shrink, yet producers are reluctant to expand their facilities and hire more employees while credit remains tight. The lack of supplies has led to skyrocketing prices, and builders pass their costs along to the home buyers, so as long as there's a lack of building materials, new home prices will remain higher than they should be.

4. Investors buying all the homes
Home sales figures are up, but a large chunk of the purchases are being made by investors, and not “traditional” buyers. Investors have one thing that the average American doesn't – an ample supply of cash, and they use it to their advantage. Investment firms are making cash-only purchases that don't require a lender, so “traditional” buyers are seeing the home they'd like to buy sell before they can even complete the mortgage application process. While it's true that home sales are up, and the lack of inventory has driven home prices higher in recent months, the fact of the matter is that average Americans aren't the ones buying the homes. Many are having to rent instead of buy, and the inflated rental costs make it hard for them to save for a down payment on a future home purchase. So, even when investors re-list their recently purchased properties in the future, it's doubtful many of these would-be buyers will be able to afford a home.

What does all this mean? The housing market is improving, but it is a long way away from a full recovery.