Byline: Martin Luttrell

BOSTON - New England's economy will see slow growth in the second half of the year, but will lag behind the nation as a whole due to the ongoing housing slump and slower job growth and per capita income growth. And the escalating price of energy will slow recovery

That was the forecast given by a panel of economists and speakers at yesterday's New England Economic Partnership's Spring Economic Outlook Conference, held at the Federal Reserve Bank of Boston.

"We expect regional performance to be behind the U.S. throughout the five-year forecast period," from 2008 through 2012, said Ross Gittell, an economics professor at the University of New Hampshire and NEEP vice president, who moderated yesterday's conference.

"The expectations in the housing market is that it will not stabilize until the second half of 2009, and we won't see any state with housing prices where they were at their peak, in 2006, at any time in the forecast."

Eric S. Rosengren, the bank's president and chief executive officer, told the conference in his keynote address that solutions to the housing crisis are not easy to find, and pointed out that housing starts have declined precipitously since their peak a few years ago.

"This is actually the largest peak-to-trough decline in housing starts to occur in nearly 50 years," he said. "The decline is occurring in what would seem, in fact, to be a relatively benign economic environment, with U.S. unemployment at 5 percent and interest rates low by historical standards."

He said the tightening of credit availability has delayed a recovery of the housing market, which has seen home prices drop for two years. Falling prices has exacerbated the record foreclosure rate, and placed more properties among the glut of inventory.

Particularly hard-hit by the foreclosure situation is the multifamily market, he said. In 2006 and 2007, multifamily properties accounted for 28.4 percent of the foreclosures, even though they constituted only 10.8 percent of the residential purchases since 1990, he said.

Panelist Alan Clayton-Matthews, professor of public policy at UMass-Boston, had a more optimistic view of the state's housing market, saying that the decline that began in the second quarter of 2006 could bottom out by the end of the year.

He also said Massachusetts is doing better than the nation as a whole in gross state product because the state has a diversified range of industry, with a large segment of science, technology and knowledge-based companies that have been successful.

But he said the state will likely lose some jobs this year as the older baby boomers begin retiring and some of those jobs are not filled. On the down side, the economic stimulus will pay for more expensive energy, Mr. Clayton-Matthews said.

"If the current $4.25 a gallon for heating oil holds, heating costs will be up 42 percent," he said. "Gasoline costs will be up 28 percent for 2008. It essentially negates the stimulus rebate."

Mark Zandi, chief economist for Moody's Economy.com, told the conference that despite the forecast for slow job growth, the region's nonfinancial businesses have generally strong finances and will be able to weather the current economic downturn.

He also pointed out that the region has not seen significant job layoffs.

"I do think it would be helpful if the administration and Congress stepped forward with efforts to stem the decline in the housing market," Mr. Zandi said.

ART: PHOTOS

CUTLINE: (1) Mr. Rosengren; (2) Mr. Zandi