Of course, the lead Eeyore is none other than Nouriel Roubini. “While last week’s housing news were mostly bad, this week’s data were mixed. The strongest good news figure was the 3.4% increase in new home sales; and this figure led many to repeat the argument that housing recession is bottoming out. Existing home sales were up a marginal 0.6% (effectively statistical noise). While the other news from the housing market were much weaker: falling mortgage applications (-14%), both for home purchases and refinancings; falling home prices according to the Shiller-Case index; another mortgage banker closing down; a leading home builder reporting a loss in Q4; many housing jobs that are filled by immigrants (and not as easily recorded in the official data) are now lost.”

Eeyore’s little helpers include Paul Kasriel of Northern Trust: “Of those postulating the possibilities of a housing-driven recession, Paul Kasriel, Northern Trust’s chief economist, is among the more pessimistic.

He thinks that because housing played such an important role in keeping the economy chugging during the last two years, if it is responsible for a recession, that downturn could be particularly severe.

Kasriel refers to a fairly simple formula: take the dollar value of new and existing single-family homes in 2005 and divide it by the nation’s gross domestic product, the total of all goods and services produced in one year. That gives you a ratio of 16.3 percent.

`That’s off the scale,’ Kasriel said. `The ratio has never been that high. The median is 8.4 percent and the previous high, of less than 12 percent, was in the late 1970s.’

Real estate prices have been dropping faster than ever before. The National Association of Realtors said last month that the median price in October for existing homes fell to $221,000 nationally, down a steep 3.5 percent from October 2005.

`That’s the largest decline on record since 1968, and the speed of the decline has been breathtaking,” Kasriel said. `It’s just like a straight line down.’”

Elsewhere, he sees the chance of a recession as high as 45% unless the U.S. Federal Reserve moves quickly to cut short term interest rates

Roubini and Kasriel are joined by Dean Baker of the Center for Economic and Policy Research. In his paper “Recession Looms for the U.S. Economy in 2007“, Mr Baker predicts: “The recovery that began in November of 2001 is likely to come to an end in 2007. The main factor pushing the economy into recession will be weakness in the housing market. The housing market had been the primary fuel for the recovery until the last year, as there was an unprecedented run-up in house prices since 1997. With prices now headed downward, construction and home sales have dropped off by almost 20 percent against year ago levels. Even more importantly, borrowing against home equity, which had been the main factor fueling consumption growth, will plummet as many homeowners lack any further equity to borrow against. The result will be a downturn in consumption spending, which together with plunging housing investment, will likely push the economy into recession. The economy will see a substantial net loss of jobs, with nominal wage growth slowing as the labor market weakens over the course of the year.”