“Housing inflation is the American national religion,” as the late market pundit Ed Hart of the late Financial News Network used to say. And as everyone knows, we’ve been going through a particularly pious phase for the past few years. But it’s looking like the housing religion is on the verge of a crisis of faith.

By just about any metric, the past several years have seen the most extraordinary boom in the US housing market in history, rivaling the dot-com stock market madness of the late 1990s. In the third quarter of 2005, the average new house sold in the United States cost 4.9 times the average household’s yearly income, up from 3.9 in the late 1990s and eclipsing the previous record of 4.3 set in 1989. But it’s not just price that set records last year–it’s also the rate of turnover. Turnover of new and existing houses in the third quarter of last year was more than 16 percent of GDP, way above its long-term average of 9 to 10 percent, and easily beating the levels reached in the housing frenzies of the 1970s and ’80s.

But that’s not all, as they say on TV. People haven’t merely been buying houses, they’ve been conducting scary experiments in financial innovation. Time was, you had to come up with a hefty down payment to buy a house. No longer: In 2005 the median first-time buyer put down only 2 percent of the sales price, and 43 percent made no down payment at all. And almost a third of new mortgages in 2004 and ’05 were at adjustable rates (because the initial payments are lower than on fixed-rate loans). At earlier peaks interest rates were near cyclical highs, but the past few years have seen the lowest interest rates in a generation. So adjustable mortgages are likely to adjust only one way: up.

But there’s more! People haven’t been borrowing aggressively merely to buy houses–they’ve been borrowing against the appreciated value to buy all kinds of other stuff. Americans have been using their houses as MasterCards, turning about $726 billion of their home equity into (borrowed) cash between 2001 and 2005. That’s a big number, even by the standards of the US economy; it’s equal to almost 40 percent of the growth in personal spending, and a nice compensation for the failure of the economy to generate new jobs at a vigorous pace. But since we’re saving nothing these days–the personal savings rate went negative in 2005 for the first time since the Great Depression–the cash had to come from abroad. Since 2001 US foreign debt has increased by a stunning $2 trillion.

One thing can be said for the housing mania: It’s kept the economy afloat since the bursting of the stock market bubble in 2000. (Wall Street economists estimate that 40 to 50 percent of the growth in GDP and employment over the last several years has been driven by the housing boom.) When the dot-coms went up in smoke, Alan Greenspan’s Federal Reserve drove interest rates down to 1 percent to contain the economic fallout. But that “cure” is what got the housing mania going; low interest rates made borrowing irresistible, and the nation’s speculative spirits were diverted away from Wall Street and toward home sweet home.

But now that all looks like it’s coming to an end, thanks in part to the Fed’s round of interest-rate increases. Sales volumes are slowing, prices are flattening or even declining, mortgage demand is easing and the inventory of unsold houses is rising.

So what’s next? Deflating the housing bubble is likely to take some time. The housing market isn’t like the stock market; it’s a lot slower, and its harder to dump one’s house in a panic than 1,000 shares of Pets.com. But removing the stimulus responsible for about half the economy’s recent growth has to have an effect. That effect could be anything from a mild drag on an already limp economy to a real financial crisis. What it is depends on whether other sectors pick up some of the slack–say, if businesses were to start hiring and investing rather than hoarding their plentiful cash or distributing it to their stockholders.

If they don’t, things could get quite unpleasant. So many households have taken on so much mortgage debt that if prices merely stop rising, they’re going to find themselves under water. And the broad economy has become so dependent on home-equity credit that its withdrawal could come as a terrible shock. Maybe the economy will finally have to face the consequences of the collapse of the 1990s stock-driven boom that it managed to avoid by speculating on housing instead. In fact, the main thing arguing against that possibility is the economy’s stunning ability to evade its dates with destiny time after time.