The end of the housing boom, which is apparently now underway, is arguably the biggest risk to
the US economic outlook over the next couple of years
. In previous Focus pieces we have argued
that even a benign end to the boom, in which house prices simply level out at the national level
rather than fall, could generate a severe slowdown in consumption and residential investment. As a
consequence, we expect GDP growth to slow to 2.0% in 2007, from 3.0% this year. There is even a
risk the economy could slip into recession.
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