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lesleyap--
you are not in trouble unless your home goes down in value and you try and sell it. Then you could take a loss. e.g.--if you paid 200,000 for your house and the value drops to 150,000, you will owe 50,000 to the bank minus whatever principal you have paid off. On the other hand, if you stay in your house for 5 to 10 years, it's unlikely you would lose money regardless of what the housing stock in your area does, because the overall trend in real estate is upward.
Regarding the economy, it's hard to say what the effect would be. Already financial areas outside the housing market have been affected, because easy credit affects more than homebuyers, but whether or not this will cause an all-out recession like 2002-2003 is anyone's guess.
