While most analysts and economists are predicting a shallow recession in 2008 and a housing downturn that will last into 2010, a report released on Friday said that the housing bubble "has now fully deflated." That's according to SMR Research Corp., who is predicting a mild housing recovery this year. The recovery is likely to be gradual, according to a report published by the company, with housing prices merely firming up or increasing slightly during 2008. "Our prior forecasts were accurate, but widely disbelieved when issued," said SMR president Stuart A. Feldstein. "We similarly expect a skeptical reaction now to a recovery forecast, which is not the common view. But the numbers are what they are." The company claims it had first identified a so-called "housing bubble" back in 2002, and that it warned of a pending credit crisis in 2004. The study, part of a report published yearly by SMR since 1986, used home price and consumer income data from several sources in an attempt to illustrate how the housing bubble grew from 2002 to 2006. The same data, however, now suggest that a housing recovery is -- or will soon be -- underway. "Homes are now affordable again," Feldstein said. "Consumer psychology is the biggest remaining hurdle to recovery." Massively tighter underwriting standards and a frozen secondary market aren't, apparently, of much concern to Feldstein. Nor are anywhere from $12 billion to $20 billion worth of borrowers that are upside-down on their existing mortgage, according to various estimates from Moody's Economy.com and others. "The stage is set for recovery, but the play won't go on if no one buys a ticket," Feldstein said. "Consumers must believe prices have bottomed out, or nearly so, before they will buy in larger numbers." Housing Wire asked a number of our industry sources about the report, and most -- to put it mildly -- were skeptical. "I'd love to see it," said one source, "but it won't happen. Numbers are numbers, like Feldstein says, right?" For more information, visit http://www.smrresearch.com.