NEW YORK (Bloomberg) — A recovery in the US housing market from the worst slump since the Depression is unlikely until "well into 2009", Housing and Urban Development Secretary Steve Preston said yesterday.

"I think we're right in the middle of it, and I think we have a ways to go before we start seeing a turnaround," Preston said yesterday in an interview at the agency's Washington headquarters. "We'll be well into 2009 before we see some real energy in this market."

A slowdown in home sales and a drop in prices has contributed to record foreclosures as borrowers are unable to afford their monthly mortgage payments. Financial firms have reported more than $500 billion in write-downs and credit losses since 2007 linked to declines in mortgage-backed securities.

US banks repossessed almost three times as many US homes in July as a year earlier and the number of properties at risk of foreclosure jumped 55 percent, California-based RealtyTrac Inc. said in an August 14 report.

The surge in foreclosures is adding pressure on the market by building the inventory of homes being offered for sale, Preston, 48, said.

"We have to begin seeing the inventory of new homes begin to reduce so that we can see the buying activity begin to pull us out of the situation we're in," Preston said.

Congress last month enacted a law to stem foreclosures that creates a Federal Housing Administration program in HUD to insure as much as $300 billion in refinanced 30-year, fixed-rate mortgages for 400,000 struggling homeowners. The law lets the US inject capital into Fannie Mae and Freddie Mac, the biggest sources of mortgage financing, through stock purchases or government loans.

Preston said he expects the program will be in effect by October 1, the date set by Congress. Senior officials from HUD, the Treasury, the Federal Deposit Insurance Corp. and the Federal Reserve are setting programme standards. FHA Commissioner Brian Montgomery represents HUD, Preston said.

Preston said "it's possible" he may propose other solutions to the housing crisis, without being specific.

"Many of the policy solutions are out there and working," he said. "My guess is that you're going to see more fine-tuning of these programmes to ensure that they're working, rather than large-scale change."

Other programmes include an industry-led effort called the Hope Now Alliance organised last year to help troubled homeowners modify their mortgages to make monthly payments more affordable.

A program HUD started a year ago called FHA Secure is also aimed at averting foreclosures by helping borrowers with adjustable-rate mortgages refinance into FHA-insured mortgages.

Preston, who was head of the US Small Business Administration, replaced Alphonso Jackson, who resigned amid a federal criminal probe into contracts awarded by the agency.