Oct. 22 (Bloomberg) -- A slowdown in the U.S. economy may be prolonged as a house-price drop cuts off a source of funding for consumers, said Joseph Stiglitz, a Nobel economics laureate.

``The average price of housing in the U.S. is already falling,'' Stiglitz said in a speech in Tokyo today. ``That will be a big problem for the U.S. and if it is a problem for the U.S., it's going to be a big problem for the global economy.''

A U.S. real-estate recession sparked by defaults on home loans to borrowers with poor credit histories may worsen as stricter lending rules and higher mortgage rates make it more difficult for potential buyers to get financing. A drop in consumer spending in the world's biggest economy may depress demand for exports in countries from China to Germany.

Stiglitz estimates that last year between $850 billion and $950 billion was taken out of the value of homes in mortgage- equity withdrawals, with a ``significant fraction'' translated into consumption and helping to offset the effect of higher oil prices.

``It is hard to see how this level of spending will be sustained as long as house prices decline and mortgage lending rates go up,'' he said.

There is also a risk that the problems of the subprime market will spread, Stiglitz said, estimating that 1.7 Americans will lose their homes over the next year as charges rise on variable-rate loans.

``As all that housing is thrown into the market, it depresses prices and that means some mortgage holders will be under water -- or the value of their homes will be less than their mortgages,'' he said.

Housing prices in 20 U.S. metropolitan areas fell 3.9 percent in the 12 months through July, a report showed Sept. 25.

The International Monetary Fund cut its forecast for U.S. growth last week.

Stiglitz won the Nobel Prize in economics in 2001 and chaired the U.S. Council of Economic Advisers under former U.S. President Bill Clinton. He is a professor at Columbia University.

To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net

Last Updated: October 22, 2007 03:10 EDT