The housing recession will drive down property values by $1.2 trillion next year and slash tax revenue by more than $6.6 billion, according to a report issued today by the U.S. Conference of Mayors. The 361 largest U.S. cities will experience a combined loss of $166 billion in economic growth, led by $10.4 billion in the New York-Northern New Jersey area, according to the study.

The effect of sliding home prices has a direct impact on lenders. About 56 percent of HSBC’s subprime U.S. home loans will slip into so-called negative equity if home prices fall ten percent, whereby a borrower’s outstanding loan is greater than the value of their property, the analysts estimated.

Negative equity is more probable when loans have high closing costs, are high loan to value, contain single premium PMI, have an attached second mortgage or HELOC, or if early payoff penalties must be added to refinance the loan.