Can the housing crash be quarantined? Will the economy keep on going as house prices decline, foreclosures explode and mortgage lenders go bust? If recent consumer confidence data is any guide, the US economy is sliding into recession.

June 26 (Bloomberg) Consumer confidence in the U.S. dropped more than forecast and two other reports signaled that demand for houses is still falling in the second year of the home-building slowdown.

The New York-based Conference Board's index of consumer confidence fell to 103.9 in June from a revised 108.5 the prior month. Purchases of new homes fell 1.6 percent last month to an annual pace of 915,000, the Commerce Department reported in Washington, and housing prices in 20 cities in April fell by the most in at least six years, according to S&P/Case-Shiller.

Dwindling property values may further erode the confidence of shoppers, whose spending kept the economy afloat for the past year. Further declines in sentiment would call into question forecasts for a pickup in economic growth by the Federal Reserve, which is likely to keep interest rates unchanged following its two-day meeting beginning tomorrow.