WSJ.com - What Happens If Real Estate Goes Bust: "A housing bust would be worse [than the stock bust],' says Kenneth Rogoff, an economics professor at Harvard University and former chief economist at the International Monetary Fund."
". . . a dollar reduction in stock wealth cuts household spending by four cents, but a dollar lost in housing wealth reduces it by seven cents. Mr. Rogoff says the effect may have since grown because home buyers are more leveraged.
"The IMF found after studying housing cycles world-wide that "private consumption fell sharply and immediately in the case of housing price busts while the decline was smaller and more gradual after equity price busts." That's even though housing price declines were usually smaller at 30%, adjusted for inflation, compared with 45% for stocks. The U.S. had never experienced a decline of such a size in the period the IMF studied, so it's unclear how much the global experience would apply to the U.S."