For an illustration showing how big the challenge to identify systemic risk is, one does not need to go back very far in history. In 2003, a young analyst in New York stated the following: “You just have to watch for the level at which a nearly unlimited or unprecedented credit growth can no longer drive housing markets higher.
I am extremely bearish and feel the consequence could be a 50% drop in residential real estate in the US. A large portion of the current [housing] demand at current prices would disappear if only people were convinced that prices were not rising. The collateral damage is likely to be of orders of magnitude worse than anyone now considers”.