Federal Reserve Board Gov. Elizabeth Duke believes an imbalance in housing supply and demand is exacerbating the nation's real estate troubles.  

Duke told the Senate Committee on Banking, Housing and Urban Affairs that the Fed is actively researching issues tied to the anemic housing market, but does not think mortgage finance issues alone are causing housing demand to sag.

She said tighter underwriting standards, elevated foreclosure cycles and a strong supply of distressed properties are certainly playing a role in the housing downturn, but on the other hand, the demand for housing is just not there.

"For the past few years, the actual and potential supply of single-family homes for purchase has greatly exceeded the effective demand, in part because of the large number of homes that have come back onto the market after moving through the foreclosure process," Duke said. "The elevated pace of foreclosures, unfortunately, is likely to be sustained for quite a while and therefore will continue to put downward pressure on home prices."

The Fed governor believes more can be done to increase credit availability with an overcorrection currently underway.

"Although some retrenchment in lending standards was necessary and appropriate given the lax standards that prevailed before the crisis, current lending practices appear to be limiting or preventing lending even to creditworthy households," Duke said. "Any policy proposals, though, will require wrestling with difficult choices and tradeoffs, as initiatives to benefit the housing market will likely involve shifting some of the burden of adjustment from some parties to others."