The decline in the real estate market that has plagued the Northeast and Southwest appears to be spreading to other regions of the country, further clouding the outlook for already depressed bank earnings.

Analysts caution that banks that expanded their real estate lending rapidly during the 1980s may see their earnings hurt for as long as three years as a result of the current real estate woes, which are particularly acute in the commercial area.

"The problem is going to be with us, in one way or another, at least through next year," said James Rosenberg, a banking industry analyst for Shearson Lehman Hutton.

Standard & Poor's has downgraded the credit ratings of about 50 banks this year -- about one-third of the banks it rates overall -- mostly because of problems with commercial real estate loans, said Tanya Azarch, an S&P banking analyst. "Nor do we think the downgradings are over," she said.

Real estate problems may hurt banks for as long as two to three years and it may take another two to three years for them to recover, said Christopher Mahoney, a Moody's associate analyst.

U.S. regulators see signs that the real estate slump is expanding.

Paul Fritts, supervision director for the Federal Deposit Insurance Corp., told Knight-Ridder that the number of states in which at least 2 percent of bank real estate loans were considered non-current rose to 28 as of March 31 from 20 at the end of 1989. "It does suggest at least there's a growing problem of varying degrees," he said. The states with the worst problems were Rhode Island, Massachusetts, Connecticut, Texas, Arizona, Alaska and New York, he said.

Fritts said it would be "highly unlikely" if the real estate problems did not affect banks' bottom lines.

Commercial banks earned $6.2 billion in the 1990 first quarter -- down from a record $7.3 billion a year earlier -- a decline the FDIC attributed largely to higher reserves for domestic loans, particularly real estate in the Northeast.

Azarch said banks became too concentrated in real estate lending and relaxed their underwriting standards, particularly around 1986.

At the end of March, real estate loans represented 38 percent of all loans at FDIC-insured commercial banks. Commercial and land development and construction loans accounted for about 47 percent of real estate loans, according to FDIC figures.

Recently, Fritts told a congressional panel the real estate problems have not yet bottomed out in New England and said the FDIC sees some "softness" emerging in California real estate markets.

Comptroller of the Currency Robert Clarke also sees the problems spreading, although Clarke has refused to identify the regions.

"We have found it is a little more broad spread than we might have thought," said a spokesman for the comptroller's office. The agency has discovered soft real estate markets "in places where we didn't necessarily expect to," the spokesman said.

Analysts say the real estate slump, particularly in the commercial area, stems largely from overbuilding during the 1980s. Contributing to that development were favorable tax laws early in the decade that allowed rapid depreciation of real estate. The tax environment for real estate got worse in 1986, when Congress lengthened the depreciation period for real estate and curbed deductions for passive partnership losses.

Also contributing to weak real estate markets is the fallout from the collapse of hundreds of U.S. savings and loans.

The Resolution Trust Corp.'s sell-off of thrifts' real estate assets has bolstered the perception that real estate values will be depressed for some time, said Fred Puorro, senior vice president for Thomson Bankwatch, a bank credit rating and consulting firm.

Peter Merrill, president of BEI Golembe, a bank consulting firm here, maintains the real estate problem is not confined to a few regions but exists any place where loans have grown sharply and real estate values have soared. "That's a lot of the country," he said.

With those real estate problems, he said, "We think earnings are going to be very disappointing this year as they were in 1989."

Signet Banking, a Mid-Atlantic banking firm, announced recently that it would post "minimal" earnings in the second quarter to provide for an increase in non-performing real estate loans.

Bank stocks have also taken a beating because of the real estate problems, analysts say.

An S&P stock index of 25 banks, including money center and regional institutions, stood at 143.90 recently, down 14.2 percent from 167.66 in early January and down 18.2 from a year earlier. By contrast, the broader S&P 500 index was 12.6 percent above its year-earlier level.

Moody's Mahoney said the problem has affected the Southwest, New England, the Mid-Atlantic region and the Southeast. "The Midwest is a question mark at this point," he said.

But Merrill said problems are starting to crop up in some Midwestern cities -- Minneapolis, for example. Indeed, the Minneapolis Fed in a recent economic survey said the area's office vacancy rate is expected to soar in the next few months.

Some analysts see the problems spreading to California, the most populous state, and credit rating firms say they are watching the situation there closely for danger signs.

Carolyn Sherwood-Call, a San Francisco Fed economist, agrees that California's market seems to be "cooling," but said that is to be expected in the wake of the state's real estate boom.

Sherwood-Call said she did not believe California would experience a recurrence of the real estate problems that have plagued New England, Arizona and Texas, saying indicators such as the office vacancy rate, dependence of the economy on construction employment, and the number of housing permits per new resident are not particularly out of line with national trends.

Puorro stressed that in some places, including Florida and California, the real estate problems vary within states. In California, for example, the San Bernardino area is showing strength while Los Angeles or San Jose may be in trouble, he said.

Alex Sheshunoff, who operates a bank information and consulting firm, suggests the impact of the real estate problems will also vary significantly among banks.

Any bank that has focused on commercial real estate lending and loans for leveraged buyouts probably will go through a "tough cycle," but those institutions that have specialized in consumer lending should continue to do well, Sheshunoff said.