Unfortunately, there are four other housing-related dominoes about to fall that will act to depress the economy over the next two years, and raise a very significant risk of recession.

The first domino is the rapid decline in mortgage equity withdrawal, the process that allows consumers to obtain cash through home equity lines and loans, mortgage refinancing, and home sales.

A recent study co-authored by Alan Greenspan indicates that consumers obtained approximately $1 trillion in cash through these techniques in 2005, which in turn boosted consumer spending by $325 billion that year.

Goldman Sachs has determined that the temporary boost to spending from the booming housing economy has already dropped from 7 percent of GDP in 2005 to 4 percent of GDP in 2006, and they project it will drop significantly again in 2007.  Early indications for 2007 through the end of March show that home equity lines of credit had actually decreased over the prior six months - the first such drop since 1999.

The second domino may well topple with the scheduled interest rate increases in adjustable rate mortgages.

The Mortgage Bankers' Association estimates that up to $1.5 trillion of adjustable rate mortgages are scheduled to reset upward in 2007.  And more of the same is in store for 2008.  Because personal savings rates are already negative, higher monthly mortgage payments will necessarily decrease funds available to consumers for other spending.

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