NEW YORK (Reuters) - Millions of U.S. homeowners who bought homes with sinking value are set to abandon the properties and cut their losses on bad investments, a leading housing market economist said on Tuesday.

Dr. Nouriel Roubini, a professor at the New York University, answers questions during the Reuters Housing Summit, in New York, February 19, 2008. REUTERS/Chip East

“We may face something unprecedented ... that is a situation where millions of homeowners are going to walk out of their homes in the next couple of years,” said Nouriel Roubini, professor of economics and international business at New York University’s Stern School of Business and head of Roubini Global Economics.

Somewhere between 10 million and 15 million homeowners might soon find that their homes are worth less than the amount of their loans, Roubini said at the Reuters Housing Summit in New York.

Such borrowers would be caught in a trap of “negative equity,” in which they are paying off loans that no longer represent the true value of their properties.

“When the value of your home is below the value of your mortgage, you have a huge incentive essentially to walk away,” he said.

Home prices across the nation are set to sink in value by 10 percent this year on top of the losses already recorded, he predicted.

If prices indeed continued to drop, Roubini said, mortgage servicers and lenders would face pressure to write down a home loan to the lower value and take big losses on many loans.

The other option would be for servicers and lenders to push delinquent borrowers into foreclosure -- but that would be costly for the mortgage industry, which would then be stuck with homes -- very illiquid assets in today’s market.

Losses could reach $1 trillion to $2 trillion when all the credit costs are totaled up, Roubini said. What began with defaults on subprime mortgages has already spread to home loans that were considered less risky, and Roubini sees more problems arising in auto loans, credit cards, student loans, commercial real estate, leveraged buyouts and corporate loans.

In the wake of the housing mess, credit conditions have tightened on a host of loans to consumers and companies, threatening to choke off U.S. economic growth. The tougher terms were a key reason behind the U.S. Federal Reserve’s decision to chop interest rates twice in less than 10 days in January.

Roubini welcomed the rate cuts, but said the central bank waited too long to prevent a recession.

“We’re going to experience a severe recession, much more severe than we had in 1990-91 and 2001,” he said, adding that while the housing slump will likely be the worst since the Great Depression of the 1930s, this recession should not be as severe as the Depression.

Roubini said the recent $168 billion two-year fiscal stimulus package should have only a modest economic benefit because a gaping federal deficit limits the government’s ability to throw money at the problem.

“We are constrained because last time around we had plenty of bullets to spend. This time around, there’s going to be a major fiscal stimulus, but compared to the one we had (in 2001) it’s going to be one-third the size as a share of GDP (gross domestic product),” he said. “This time around, we’re not going to be able to stimulate the economy as much.

(Additional reporting by Emily Kaiser in Washington, editing by Gerald E. McCormick)