Is The Bust Coming?

NEW YORK (AP) - Much of the nation has had a lovely real estate boom for the past five years, but the house party is almost over and the cleanup won't be pretty.

That's the word from economists and investors who have watched housing prices march ever higher.

"The collapse of the housing bubble will throw the economy into a recession, and quite likely a severe recession," warned a July report by the Center for Economic and Policy Research.

In recent weeks, many major investment firms have concurred. Said a Lehman Brothers report, "(A) turn in the housing market is central to our economic forecast. "

"The demographic story behind the housing market boom, as we always thought, was a giant hoax," wrote Merrill Lynch & Co.'s North American Economist, David Rosenberg, in a recent report.

If housing prices decline sharply, the effects could be broad. Lehman estimates one-third of the past year's U.S. economic growth was a consequence of the housing boom. Housing construction is equal to 5 percent of the national economy.

A downturn in housing could mean more than 1.3 million lost jobs, Goldman Sachs Group Inc. predicts, bumping up the national unemployment rate by 1 percent and the unemployment rate in house-mad California by 2 percent. Those numbers don't include likely job cuts in housing-dependent businesses, such as banking, furniture and building materials.