The slowdown is likely to last several years, with as many as 500,000 construction jobs and 300,000 financial sector positions lost, the quarterly Anderson Forecast predicted.
"We expect housing to start slowing the economy this quarter or the next," said Edward Leamer, director of the study done at the University of California, Los Angeles.
"Some jobs in manufacturing might well disappear as a result of weakness in housing, but this may be offset by jobs brought home or not lost to foreign competition," he wrote.
The forecast said eight of the last 10 economic recessions were started by housing market slowdowns. Though the coming cooldown will cause a drag on the nation's economy, it will fall short of triggering a recession, the forecast said.
The report cited several signs that the decline could be under way:
"On all these grounds, we believe housing is due for a sustained decline," economist Michael Bazdarich wrote in the forecast. "The remaining questions are how hard the fall will be and when it will begin."
The forecast for California, where housing prices lead the nation and housing-related jobs have been driving economic growth, resembles the national outlook.
Economist Ryan Ratcliff said the state's housing market will see a slowdown in spending along with job losses in construction and related sectors.
He expects California home prices to plateau while sales and new construction see moderate decreases during two years of weak growth.
"If the housing market slows more than we are expecting, a recession is not out of the question," Ratcliff wrote.
Counties showing signs of a cooldown include San Francisco, where housing sales have been off 20 percent since peaking in June, 2004. San Diego County has seen sales slow about 13 percent, while monthly price gains have plummeted to low single digits.
California's job picture has been lackluster in recent months. The rate of employment growth has slowed after a significant number of jobs were added in July and August.
Construction has remained the fastest-growing sector. But Ratcliff predicts a slowdown in construction activity through 2007 and moderate construction job losses.