A report out today (Nov. 27) from the U.S. Conference of Mayors predicts that the housing downturn and related crunch in the credit markets will sink the national economy into a period of "sluggish" growth and result in economic output losses in 361 metropolitan areas.

The good news is that the report, prepared by the economic forecasting firm Global Insight, stopped short of predicting a full-blown recession.

Still, the report forecasts that the continued malaise in the housing market will shave $166 billion from Gross Domestic Product, with the top-10 metro areas taking a $45 billion hit. As a result, the report forecasts that 524,000 fewer jobs will be created next year. Tax revenue losses in the states that house the top metro areas could approach $6.6 billion, the report said.

Regarding housing, specifically, the report predicted that home price declines across the U.S. will average 7% in 2008, ranging as high as 16% in California. Housing starts will continue to decline until the second quarter of 2008, when the annual rate housing starts will be just 800,000, a drop of almost 20% from current levels. Sales of existing homes also will continue to fall by another 10% in 2008.

The report also predicts that consumer spending will slip to 2% growth, well below a 3.1% gain in incomes.

"Not that long ago economists said housing was the backbone of our economy," saidUSCM President Douglas Palmer, Mayor of Trenton, NJ, at a meeting of mayors,mortgage industry representatives and community advocacy groups at the MGM Hotel inDetroit. "Today the foreclosure crisis has the potential to break the back of our economy, as well as the backs of millions of American families, if we don't do something soon. We must not let the economic numbers mask the face of this tragedy--the families who are struggling to pay their mortgages and stay in their homes," said Palmer.

The report, entitled The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas, found that weak residential investment, lower spending and income in the construction industries and curtailed consumer spending resulting from decreased home equity will have "multiplier effects" on the nation's economy. Other report findingsinclude: The foreclosure crisis alone will reduce home values by an additional $519 billion in 2008, bringing the total forecast of lost equity for the nation's homeowners to $1.2 trillion; in 2008, the economy will grow at a rate of 1.9%, a full percentage point lower than would have been the case without the mortgage crisis; foreclosures will increase by at least 1.4 million in 2008; these homes represent a market value of $316 billion.