The International Monetary Fund (IMF) Wednesday lowered the growth forecast for the U.S. economy this year to 2.2 percent, 0.7 of a percentage point lower than the forecast six months ago.

"The downward revision to growth in 2007 largely reflects the weaker outlook for residential investment," said the IMF in its annual World Economic Outlook.

With the stock of new homes for sale rising to its highest level in over 15 years, home construction is falling more sharply than previously expected as home builders move to reduce their existing inventory, said the report.

A sharper-than-expected slowdown in the housing market would pose risks to both residential investment and, through the impact on wealth and employment, consumption.

The report also warned that the deterioration in credit quality in the risky subprime mortgage market could spread to other market segments in a weaker housing environment, adversely affecting the financial sector and credit availability.

But the report was confident that the U.S. economy is not heading for recession and the growth forecast for the next year will rise to 2.8 percent, a little higher than the euro area's 2.3 percent growth forecast for this year and next.