Are home values floating merrily upward in a bubble that's about to burst? Many of the economists who correctly predicted the bursting of the stock market bubble, including Yale University's Robert Shiller, think so.

If the housing market should collapse as the stock market did, the impact could be even more painful, warns Bruce Bartlett, a senior fellow with the National Center for Policy Analysis.

For one thing, Bartlett says, homeowners are much more leveraged than they used to be.

According to the Federal Reserve, home equity has fallen to 56.3 percent of their real estate from 75 percent a generation ago. Another Federal Reserve study found that 16 percent of the money taken out in refinancings was simply consumed.

According to Freddie Mac, people are taking more and more money out of their homes. Cash-out refinancings have risen to 18.1 percent of all refinancings from 7.2 percent in 2003. In the last four years, homeowners have taken $559 billion in equity out of their homes.

More and more homeowners are buying and refinancing with unconventional loans, such as adjustable rate and interest-only mortgages, rather than traditional fixed mortgages.

These loans offer low initial payments, but will rise automatically when interest rates rise, putting homeowners in a potential bind. The Federal Reserve says that 47 percent of all residential mortgages by dollar volume are now non-traditional.

Economist John Makin of the American Enterprise Institute notes that housing has a powerful effect on economic growth through construction, employment, purchases of durable goods like refrigerators and in other ways.

He estimates that if home prices simply level off and stop rising, it will cut 1 percent off the real gross domestic product growth rate.