With prospects for the U.S. housing market remaining poor, some analysts say the odds that the country’s economy is heading toward a recession remain at 50/50.

In August, the median selling price of a new home was down 7.5% from a year earlier as the number of homes sold in the month dropped to 800,000, the lowest level in more than seven years, according to the U.S. Census Bureau. And in July, prices for home sales in 10 major U.S. metropolitan centres were down an average of 4.5% from a year earlier, according to the S&P/Case-Shiller home price index.

At the same time, tighter lending standards have pushed the inventory of completed homes to an unprecedented level of more than 180,000. That’s more than an eight months’ supply — and in National Bank Financial Ltd. ’s view, “argues for more significant price concessions from homebuilders in the coming months.”

As if that weren’t enough, the Chicago Mercantile Exchange real estate futures home price composite index suggests continuing drops at the national level through mid-2010 for a cumulative 18% decline.

Given these figures, NBF’s economics and strategy group in Montreal continues to put the odds of a recession in the U.S. at 50%.

What’s been holding the economy up has been fairly strong labour markets and buoyant wage gains that have kept retail cash registers humming. But NBF notes that the labour market weakened over the summer, suggesting a “cresting in wage growth,” which, in turn, “sets the stage for a significant deceleration” in consumer spending.

The problem is that consumers have become increasingly dependent on home equity to finance a portion of their spending; this will no longer be an option given the declines in home values. And if wage growth also moderates, the squeeze on household budgets will be further exacerbated.

U.S. President George W. Bush unveiled proposals to help reduce foreclosures for low- and middle-income homeowners on Aug. 31. Specifically, the U.S. Federal Housing Authority will help a projected 80,000 families with strong credit histories to refinance their homes, thereby reducing the shock of interest-rate resets.

NBF says this will help, but points out that it’s a tiny initiative in the face of the six million subprime mortgages. Nor will it ease the situation of speculators, who helped drive house prices up and who are also over-leveraged. Loans on non-occupied sites accounted for about 20% of the total housing loans made in recent years.

What may keep the U.S. out of recession, says NBF, is aggressive interest-rate cutting by the U.S. Federal Reserve Board, which has already reduced the Fed rate by 50 basis points, to 4.75% from 5.25%. NBF expects the rate to fall another 100 bps, to 3.75%, by the first quarter of 2008.

NBF is forecasting 1.8% growth in the U.S. this year and 1.5% in 2008. It expects Canada to grow at 2.9% and 2.2%, respectively, which is similar to, but a bit better than, what’s forecast for Euroland, Japan and Britain.

World growth is expected to slow to only 4.1% from 5% as emerging economies continue to grow strongly. China’s real gross domestic product, for instance, is forecast to increase 8.6% in 2008, following 11% this year, with India at 7.3% vs 8.4%.

Asia, excluding Japan, now accounts for 25% of world GDP and with rising incomes domestic demand insulates the region somewhat from what happens elsewhere. But Asia would be significantly affected by a U.S. recession given the amount it exports to the U.S. IE