The housing market sinkhole appears ready to gobble down the whole economy.

“We do think that the U.S. is in a recession right now,” said Nariman Behravesh, chief economist and executive vice president of Waltham-based data firm Global Insight.

Behravesh was one of the presenters at the Connecticut Business & Industry Association’s 2008 Economic Summit & Outlook, held in Hartford, Conn., last Tuesday. Also speaking at the event was Eric Rosengren, president and chief executive officer of the Federal Reserve Bank of Boston, who expressed his concerns about the housing market’s effects on the broader economy.

Though characterizing it as a “mild recession,” Behravesh said the national economy would have negative growth in the first two quarters of 2008. A pickup in the second half of the year, he projected, will mean annual gross domestic product growth for 2008 of between 1 percent and 1.5 percent.

The recession has been triggered by two shocks to the economic system: oil prices topping $100 per barrel and the unraveling of the housing market in the wake of the subprime lending mess, Behravesh said.

“Housing is still the major problem,” Behravesh said. “Housing is really dragging down growth by 1.5 to 2 percent.”

That, coupled with record prices for oil, is expected to have an impact on consumers.

“We think they’re going to tighten their belts,” Behravesh said.

“My view is that the continued decline in residential investment has heightened the risk of a more significant downturn in the overall economy,” Rosengren said in his prepared remarks. “Falling housing prices further weaken the incentives for residential investment, but are also likely to dampen consumer business confidence and spending. Furthermore, falling housing prices roil financial markets and financial institutions by exacerbating exposures to the housing market.”

Both Behravesh and Rosengren attempted to give the housing market’s slump a historical context.

“By some measures, this is the worst housing downturn since World War II, which is to say the Great Depression,” Behravesh said.

Rosengren highlighted the uniqueness of the length of the declining sales.

“Residential investment began declining in the first quarter of 2006, and has continued to decline in each quarter since,” Rosengren said. Projections call for continued declines through the first half of 2008, he added.

“Should the forecasts prove to be right, we will have experienced a longer string of back-to-back quarters of declining residential investment than at any other time in the past 50 years,” Rosengren said.

While previous prolonged drops in housing typically came with an economic downturn, the current situation is unusual in a couple of ways – and therefore more difficult to predict, he said. For one, the housing decline is happening during a period of low inflation and low interest rates, he said. For another, the decline in housing prices is happening at a national level, whereas previous declines had been regional, he said.

Behravesh also addressed the uniqueness of a national dip in housing prices.

“This is the first time we’ve seen a drop in national prices since the 1930s,” Behravesh said.

Global Insight’s projections show national housing prices declining through 2009, with a peak-to-bottom drop of more than 10 percent.

The falloff in housing construction and home sales throughout New England is roughly comparable to the rest of the nation, Rosengren said.

“Housing prices, which grew very rapidly from 1998 to 2005, have leveled off and in three New England states – Massachusetts, Rhode Island and New Hampshire – prices are down from a year ago,” Rosengren said. “While Connecticut’s experience is a little more favorable than some of its neighbors, the picture is broadly similar.”

Despite the gloomy forecast, there are a couple of bright spots. One is that the end of the housing downturn may be in sight, and two, there could be more help coming from the Federal Reserve.

“I think we’re starting to approach the bottom of this [downturn],” Behravesh said. While prices are predicted to keep dropping into 2009, the number of sales is expected to bottom out in the summer of 2008, he said.

Behravesh also expects the Fed, which has already cut its target rate 100 basis points in the past few months from 5.25 to 4.25 percent, to cut off an additional 100 points in 2008. He predicted a cut of 50 basis points in January. A basis point is one one-hundredth of a percentage point.

‘Be Prudent’

Rosengren talked about another type of relief, specifically one that reaches out to subprime borrowers potentially facing foreclosure. The $125 million Mortgage Relief Fund, made up from a commitment from five banks, is targeted at subprime borrowers who could be candidates for loans at prime rates, making use of both federal and state insurance programs, he said.

“To date the banks – Bank of America, Citizens Bank, Sovereign Bank, TD Banknorth and Webster Bank – have had over 430 calls from borrowers, and a number of them are beginning the application process or have already submitted loan applications,” Rosengren said. “Because borrowers can qualify for government-insured loan programs with as little as 3 percent equity in the house, this is an important initiative for borrowers to consider if they are currently holding subprime loans.”

But the projected decline in home values has added a sense of urgency to the program.

“I would encourage subprime borrowers to act now,” Rosengren said. Otherwise, a loss in home value could rob them of the needed 3 percent in equity, he said.

The advice for last Tuesday’s audience, which included legislators and members of the business community, reflected the concerns about an economy heading into recession.

“Be prudent now in preparing for this rainy day,” Perna said.