This research was published on August 9, 2022 on Fortune

Recession fears are escalating as the economy is slammed by higher energy prices and tighter monetary policy. While higher interest rates are intended to slow things down, this may be working too well in the housing sector, where the pandemic boom is coming to a screeching halt. Is a housing bust going to tip the slowing economy over the edge? And could that recession have lasting structural consequences?

Downplaying the role and risk of housing in the economy is treacherous. In 2007, Ben Bernanke, then chair of the Federal Reserve, said that troubles in housing “will likely be limited,” and at the time that may have been true. But the rapid transformation from limited to systemic risk in the mid-2000s reminds us that housing must be continually watched. Is it merely a headwind, a credible recession driver, or—worse—a structural risk?