4 Trillion Upside Down

Bloomberg reports that American homeowners are 4 trillion dollars in the hole.  They took figures from the Federal Reserve on the outstanding mortgages versus market values to arrive at that number.  How will the housing market recover?  A large obstacle is the National Appraisal Protocol Policy which has established guidelines for appraisers that makes it practically impossible for values to begin to recover.  When an appraiser is limited to considering comparable properties for a sale that have closed in the last 3 months only, how can values creep up?  REO's now outnumber New Home Sales 19.5% as compare to 11%.  Does an REO property reasonably set the value for a neighborhood?  Resales account for 69.5% of sales but included in that figure are Short Sales which NAR  (National Association of REALTORS) reports count for  most of the homes closing today.  Short Sales are REO's waiting to happen and are by nature sold at fire sale pricing.  How can this be an accurate portrayal of true value?