Tumbling home prices in some regions of the United States continue to take a bite out of consumer spending, limiting U.S. economic growth to a below-potential 2.4% this year, according to the Conference Board of Canada.

“The housing market downturn is in full swing, and there are many indications that it is far from over,” said Kip Beckman, principal research associate. “The situation in U.S. housing markets may not stabilize for another six months.”

Housing starts are forecast to drop by more than 10% for the second consecutive year. More and more households are also encountering difficulties in making their mortgage payments. Weak housing markets are a drag on consumer spending growth in several ways. In addition to lower spending for home-related purchases and a declining number of construction jobs, declining prices are estimated to remove another US$1 trillion from overall household wealth this year.

Despite the struggles in housing markets, real household spending is still forecast to grow by 2.7% in 2007. These gains will come from employment growth in the service sector of the economy, along with solid wage gains-particularly in the financial industry and leisure/hospitality, which are relatively immune to overseas competition.

Two factors will enable the U.S. to stay out of recession in 2007. Export growth is solid, thanks to a weaker U.S. dollar and stronger performance in overseas markets. In addition, business spending on equipment will remain solid.