by Calculated Risk on 5/11/2005 09:57:00 PM

Danielle DiMartino continues her series on housing with "More than real estate in danger".

How widespread will the fallout be when housing's no longer driving the train?

Mark Zandi, chief economist at Economy.com, was one of the first to identify the broad economic implications of a potentially overheated housing market.

Mr. Zandi breaks the sector's impact into three areas:

•Direct effects – home building, home improvement and professions directly tied to home sales.

•Indirect effects – the cash the American home is generating via cash-out refinancings, home-equity borrowing and capital gained from home sales.

•Spillover effect – the impact housing is having on non-household balance sheets.

I tried to quantify these same impacts in "After the Housing Boom: Impact on the Economy" on Angry Bear.

"More and more alarm bells are going off every day," Mr. Zandi said, "and speculation is infecting a growing number of communities across the country."

I hope Zandi is wrong, but I'm afraid he is right.