I study housing and market-based financial intermediaries (MBIs) as sources of business cycles versus propagation mechanisms of traditional macroeconomic shocks using macro and financial data from 1985-2011. Combined, shocks originating in the MBI funding market and to housing demand account for 4% [-] 42% of fluctuations in macro, financial, and house price data. Shocks originating from MBIs account for the initial phase of the housing boom from 2001-2004 and dynamics in credit, leverage, and investment since the late 1990s. Housing demand shocks account for the 2006 collapse in housing prices but are otherwise unimportant. A decomposition of the Great Recession supports a growing consensus that it was an unprecedented confluence of large shocks, only some of which were directly related to the housing market and financial sector. A steady-state analysis of the effects of financial deregulation reveals that higher MBI leverage cushions the economy from traditional macro shocks but at the cost of making it more vulnerable to financial sector shocks.