May 28 (Bloomberg) -- The U.S. housing market is nowhere near recovery and signs of stabilization are premature, said David Sokol, a top aide to billionaire investor Warren Buffett who oversees the nation’s second-largest real estate brokerage.

Sokol was among money managers who told an investment conference in New York the economy is still deteriorating and they don’t have a lot of confidence in President Barack Obama’s economic policies.

“We’re not seeing the green shoots,” said Sokol, head of MidAmerican Energy Holdings Co., which owns HomeServices of America Inc. “We don’t see improvement.”

MidAmerican is owned by Buffett’s Berkshire Hathaway, and Sokol is considered a possible successor to Buffett as head of Berkshire. Sokol spoke before reports today showed new-home sales posted their second increase in three months during April, and mortgage delinquencies and foreclosures rose to records in the first quarter.

Homes in the process of foreclosure are creating a “shadow backlog” of unsold properties that will continue to hang over the market, Sokol, 52, said in a speech yesterday at the Ira W. Sohn Investment Research Conference in New York.

While official statistics show a 10- to 12-month supply of unsold homes, “we believe the backlog of homes for sale is twice that.”

Balance in 2011

Many people who want or need to sell their homes haven’t put them on the market yet because the outlook for sales has been poor, he said. “It will be mid-2011 before we see the market in balance,” with no more than a six-month backlog, he said.

The National Association of Realtors reported yesterday that the number of previously owned houses on the market in April climbed 8.8 percent to 3.97 million, a 10.2 months’ supply.

Sokol suggested government efforts to ease the crisis are actually drawing out the recovery. “We really need to let the economics work through the system,” he said.

It is still difficult and costly for businesses to borrow, Sokol said, creating “headwinds” for recovery. He predicted the U.S. unemployment rate would rise above 10 percent from April’s 8.9 percent.

Peter Thiel, the co-founder of PayPal who now heads the $2 billion San Francisco-based hedge fund Clarium Capital Management LLC, told the conference the stock market’s recent gains will fade and the price of “long assets” such as houses will continue to fall, while Federal Reserve pump-priming will mean “inflation in all the wrong places.”

Solving ‘Wrong Problems’

The administration’s economic policy is aimed at solving “the wrong problems” by trying to raise short-term growth instead of creating conditions to improve long-term productivity. “We’ve had phenomenal growth but median incomes have barely gone up since 1971,” said Thiel, 41.

That’s because a drop in support for research and development means “there is far less happening than meets the eye” in science and technology. “Innovation is barely enough to keep up,” Thiel said. “There can’t be a V-shaped recovery until we fix the science problem.”

Paul Singer, founder of the $13 billion hedge fund Elliott Management Corp. in New York, said he sees a period of volatility ahead, as “deflation, inflation and monetization clash over the next year or so.” A rush to impose new regulation on the financial industry may backfire, Singer, 64, said. “I rue and fear this upcoming period of retribution,” he said.

‘Back to 2006’

Greenlight Capital Inc. founder David Einhorn accused the Obama administration of slowing recovery by trying to “take us back to 2006” economic conditions through deficit spending and by propping up failing institutions.

Treasury Secretary Timothy Geithner is “leading us down the wrong path” by refusing to force banks to recognize big losses in their portfolios and recapitalize, Einhorn, 40, said. Instead, Geithner is counting on banks to earn their way out of trouble as the economy recovers, a strategy that postpones expansion, he said. “Hope is not a good strategy.”

Einhorn, who announced at last year’s Sohn Conference that he was betting against Lehman Brothers Holdings Inc., criticized Geithner, former Treasury Secretary Henry Paulson, and Fed Chairman Ben S. Bernanke for their handling of the financial crisis. “Why wasn’t more done between Bear Stearns and Lehman to protect the system?” he asked.

Peter Schiff, who oversees about $1 billion as president of Euro Pacific Capital in Darien, Connecticut, also criticized the combination of deficit spending by the government and a massive expansion of bank reserves by the Fed, saying they risk “out of control” inflation.

“We can’t solve a problem brought on by too much borrowing and lending by more borrowing and lending,” he said. Schiff, who forecast a debt-driven recession three years ago, said the Fed’s purchase of many of the new Treasury securities issued to fund the deficit resembles a Ponzi scheme.

“I don’t know why they got Bernie Madoff in jail,” Schiff said. “They ought to make him secretary of the Treasury.”

To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net.

Last Updated: May 28, 2009 12:17 EDT