The Big One isn't the long-predicted California earthquake or even a hurricane named Katrina. The genuine big one will arrive with a deafening pop, the sound of the real estate bubble bursting. In the past few years there have been plenty of false sightings, but now comes something truly ominous: a 13 percent drop in Manhattan real estate prices in a mere three-month period ending October 1.

As if that were not bad enough, more unsettling news of the same nature is reported in Boston, Washington and San Francisco, the places that have led the national upward zoom in real estate prices for the past several years.

The rise in real estate prices has resulted in a huge jump in unearned income for homeowners. By taking home equity loans and cashing out--that is, refinancing the mortgage--every time their houses went up in value, the millions made billions. According to Federal Reserve chairman Alan Greenspan, they made $600 billion last year on the hypothetical appreciation of their properties. That adds up to about 7 percent of their spendable, after-taxes income. That's twice as much money put into people's hands as Bush's tax cuts.

That money went into retail spending at the mall, on vacations, new cars and other forms of happy doodadderie. If house prices stop going up, the 7 percent vanishes and there must be a huge drop in retail sales, which are the single largest force keeping the prosperity balloon in the air. Add on to that what high gasoline prices are doing to the automobile industry, and most people's flat or declining incomes, and you have the makings of a fairly decent recession.

Let's not be too alarmist. Today is truly different from the past. There are no reliable historical precedents to fall back on, and one quarter does not make a trend. Still, that there could be such a drop in such a short length of time is very unusual. This is stock market behavior. Stocks go kerplunk! Real estate goes down with a whisper, like a slow leak in a tire--or, at least, it did.

Again, there is a new element. It takes time to sell the house you are living in, but a second home can be put on the market as fast as you can tell your broker to get you out of General Motors. And there has been a spectacular rise in the sale of second homes. The second-home market is now put at about 15 percent of all home sales.

A lot of these are vacation homes, but many are houses and condos bought by people with no experience and probably no talent for real estate in hopes of making a profit. These easily spooked amateurs are the kind of greedy little innocents who can start a landslide.

The prevailing belief has been that the housing market would stay strong as long as mortgage interest rates remain low or lowish. For reasons nobody, not even the most owl-eyed economists, understands very well, the rates have stayed fairly low.

So how can the market collapse? It's the old story. You watch the raccoon so he doesn't slash you and you get a squirt from the skunk you weren't paying attention to. Regardless of interest rates, if there are too many houses for sale, the prices will go down.

That was a factor in the last great real estate crash, when we found out that commercial property was so overbuilt that nothing could save the market, not even truckloads of low-interest mortgages. Whatever the actualities, a lot of people in the home-building industry are giving off signs that they think prosperity has gone into remission. Executives in the industry have sold off almost a billion dollars' worth of stock in their own companies this year, something they would not be doing if they thought the arrows were pointing upward.

If housing does do its long-awaited plop, there are some pluses. Savings may go up, we'll buy less from foreigners and owe them less, we'll be better able to pay some of our bills. Who knows! In business the only thing that is permanent is impermanence--which always brings with it a new set of winners and losers.

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