The struggling housing market faces serious obstacles and will drag on the country’s economic rebound this year, though a nationwide double-dip recession is unlikely, a top economist at the New York Fed said today.

The growing number of defaulted mortgages "continues to weigh down any recovery in the housing market," Joseph Tracy, an executive vice president and senior advisor to the president at the New York Federal Reserve Bank, said in prepared remarks to an economic outlook summit today.

"Distressed sales are expected to grow even further over the coming year," he told the Connecticut Business & Industry Association and Metro Hartford Alliance Economic Summit & Outlook 2011.

"However, the protracted process of resolving the overhang of negative equity resulting from the overvaluation of housing during the boom will remain a headwind restraining economic growth for several years to come," he said.

But the economy will most likely improve despite the drag from housing, Tracy said, adding: "The risk that the economy will enter a double-dip recession now seems quite low."

Tracy credited the nation’s lawmakers’ recent extension of tax cuts for some of that optimism as well as the Federal Reserve’s decision in November to buy up to $600 billion in additional Treasuries and stronger retail sales over the December holiday. (Reuters)