WASHINGTON (AP) – One more threat for the fragile economy – the possibility that America’s booming housing market could be headed for a bust.

In a survey of global economic dangers, the International Monetary Fund warned on Thursday that the U.S. housing market, after two years of record sales over and strong increases in home prices, could be headed for a fall.

The study said that based on past experience, a housing bubble in an industrial country has a 40 percent chance of being followed by a sharp drop in prices.

It did not explicitly forecast a U.S. housing bust, but did raise concerns about its possibility, especially because past housing declines have been associated with periods of global economic weakness, such as the U.S. recessions in 1991-92 and 1981-82.

The IMF study contrasts Federal Reserve Chairman Alan Greenspan’s belief, expressed in congressional testimony and speeches, that the U.S. housing industry is not headed for a sharp falloff in sales or prices.

The record level of sales of both new and existing homes over the past two years has been spurred by the Federal Reserve’s campaign to push interest rates to the lowest level in four decades. The idea is to bolster a U.S. economy hit by plunging stock prices, the 2001 recession, terrorist attacks on New York and Washington and corporate accounting scandals.

The IMF report, titled “When Bubbles Burst,” examined the effect of sharp declines in prices of both homes and stocks. The U.S. economy is still suffering from the fallout of a burst stock market bubble that began in early 2000. Since that time, stock prices have fallen for three straight years, something that hasn’t occurred on Wall Street in more than a half century.

To qualify as a bust in the IMF study, the drop in stock prices had to exceed 37 percent while the decline in house prices only had to exceed 14 percent. The average price drop in a stock market bust was 45 percent while the average housing price decline was 30 percent.

While the report found that housing busts occurred less frequently than stock market slumps, housing declines tended to last longer and were a bigger drag on the overall economy.

The IMF said that stock market declines occurred on average every 13 years, lasted for about 21/2 years and resulted in a 4 percent loss in total economic output.

By contrast, a period of sharp declines in housing prices tended to last nearly twice as long – four years – and resulted in a GDP loss that was twice as large as the GDP losses caused by a drop in stock prices.

“Housing price busts were less frequent (than stock market declines) but lasted nearly twice as long and were associated with output losses that were twice as large, reflecting greater effects on consumption and banking systems, which are typically heavily exposed to real estate,” the IMF said.

IMF officials stressed that they were not saying that the current 27 percent rise in home prices was an asset price bubble that was bound to burst – but officials said economic policy-makers need to be aware of the potential risks.

Greenspan has argued that when housing bubbles emerge in the United States, they tend to be localized in particular parts of the country. He said that housing prices are also not as volatile as stock prices, because it is easier to sell stock than homes.

“Any analogy to stock-market pricing behavior and bubbles is a rather large stretch,” Greenspan said in a recent speech.

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On the Net:

IMF: http://www.imf.org

AP-ES-04-03-03 1812EST