Lennar’s disappointment came the same day the National Association of Realtors reported that sales of previously owned homes fell in August to the lowest level in five years. The slowdown is extending to major retailers, including Target Corp. and Lowe’s Cos., which have trimmed profit expectations for the year as consumer spending wanes. “It’ going to be a distressingly long time before we get back to normal,” said University of California, Los Angeles, economist Edward Leamer, who predicts a 20 percent price slide over three or four years in once red-hot real estate markets, including California, Nevada and Florida. Since the magnitude of this housing boom was unprecedented, economists are uncertain about how severe the downturn will be, said Susan Wachter, a real estate and finance professor at the University of Pennsylvania’s Wharton School of Business. She rates the odds of recession in the next year at one in three. “We are in uncharted territory,” she added, noting that a recession would further slow recovery in the battered housing market. Former Federal Reserve Chairman Alan Greenspan estimates the likelihood of recession, generally defined as two consecutive quarters of a decline in economic growth, as less than 50 percent but greater than 1-in-3 odds. The Fed, chaired by Ben Bernanke, calculates that a 20 percent drop in inflation-adjusted home prices over two years would cut U.S. economic growth up to 11/2 percentage points after three years. The delay in the impact reflects how long it takes negative or positive events to show up in the gross domestic product in the U.S., with its huge and dynamic market, according to Fed research. Not everyone sees a gloomy outlook. The National Association of Realtors, which had been criticized by economists and bloggers for its sunny predictions during the boom times, remains optimistic. The group’s senior economist, Lawrence Yun, projects home sales will stabilize after modest gains early next year. Peter Orszag, director of the nonpartisan Congressional Budget Office, told lawmakers last week that financial market turmoil, weakened consumer confidence and the housing market downturn pose economic threats but are not likely to sink the economy. On the plus side, the nation’s unemployment rate is low, as are long-term interest rates. Despite a rocky summer, benchmark stock indexes are up for the year, and inflation appears to be in check. The central bank is doing its part to prevent the economy from stalling, cutting a benchmark short-term interest rate half a percentage point last week to 4.75 percent. Joel Naroff, chief economist for Commerce Bank, said that, if the Fed cuts rates by an additional percentage point, “that could help turn (the housing market) around by the end of next year.” Yet recession fears are on the rise. Dean Baker, co-director of the Center for Economic and Policy Research in Washington, warns of a severe downturn as the housing market continues to unravel. Baker said he is bracing for the worst recession since World War II. In a bubble market, buyers don’t need to focus on whether an asset is overpriced, he said. In a weakened economy, “the psychology is broken,” Baker said.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! Home prices fell less than 3 percent during the economic downturn of the early 1990s and rose through the 2001 recession, but have already dropped 3.2 percent over the past year, according to a closely watched housing market index created by Shiller. “This time, we’re in a bigger boom, and we face the possibility of a bigger decline,” Shiller told lawmakers last week. “It’s not just an issue of a recession coming up; it’s an issue of a drag on the economy, which might extend over many years.” Record energy prices are exacerbating recession worries as the U.S. heads into the coldest season of the year in most parts of the country. Signs of the housing market fallout are easy to find. Employers cut jobs in August for the first time in four years. Especially hard hit: home builders and mortgage-lending companies. On Tuesday, home builder Lennar Corp. posted a third-quarter loss of more than $510 million, said it had cut its work force by 35 percent so far this year and warned of future job losses. WASHINGTON – U.S. home prices have fallen further since mid-2006 than during the 1990-91 recession, and professional traders bet they’ll plunge up to 10 percent more in the next year. If the speculative traders making big-money bets are headed are right about where housing prices are headed, the question is not whether a U.S. recession is ahead but when it will start. Sizable drops in home prices in a year would likely curtail consumer spending sharply. Yale University economist Robert Shiller, who has long warned of inflated home prices, said a big hit to U.S. housing assets, worth about $23 trillion, would shock the broader economy. “It will upset balance sheets, it will upset lots of our economic institutions,” said Shiller, who argues that home prices were driven higher by greed, not by people just looking to live in places they bought. Adjusting for inflation, housing prices have soared 86 percent nationally in the past decade, and some cities, such as New York, Los Angeles and Washington, saw far larger jumps than most regions of the country. Yet homeowners’ ability to tap into credit lines pegged to the value of their houses has been a potent economic driver in recent years. For the vast majority of U.S. households, the home is the most substantial financial asset. If its value plummets, so does consumers’ sense of prosperity, which can restrict spending on everything – vacations, cars, eating out or buying new clothes.