Although some market watchers think National Bank Financial’s call of an even chance of a U.S. recession is too gloomy, NBF says it is sticking to that view.

NBF notes that during the past few weeks it has raised its estimate of the probability that the U.S. economy will slip into recession from 30% to 50%. “Some observers believe that this outlook is too pessimistic,” it allows.

But, it maintains the fallout from the U.S. real estate market weakness is likely to flow through to the economy at large. It notes that a study by the International Monetary Fund demonstrates that, “the bursting of real estate bubbles engenders twice the fallout on the real economy than does the bursting of stock market bubbles. Real estate bursts hit consumption, the economy’s key driver, much harder.”

“That means the Fed’s challenge, which is to bring the economy to a soft landing during the coming quarters, is a big one. Complicating things is the fact that the effects of monetary policy actions generally take between six and 18 months to flow down into the real economy,” it adds.

“Judging from the results compiled by the IMF on the after-effects of the bursting of asset price bubbles in the real estate sector, our decision to raise our estimate of probability that a U.S. recession will occur appears to be more than justified,” NBF concludes. “Let’s just keep our fingers crossed and hope that the Fed acts soon to loosen up monetary policy.”