Wellesley College economics professor Karl Case, co-founder of the S&P/Case-Shiller Home Price Index, says commercial real estate “absolutely” could be the next domino to fall.

“It’s not as big as residential,” he pointed out in an interview with Dan Mangru of Moneynews.

About 30 percent of U.S. loans are secured with residential real estate, compared to 13 percent for commercial real estate, Case points out.

But, “commercial real estate is quite volatile,” he says.

“I think there will be trouble in commercial real estate. I don’t think it will be nearly as big a problem for the economy to handle as residential real estate.”

Still, “you can look at the number of workers lost in the service sector, certainly the office and retail sectors,” Case says.

“And you can count the number of square feet out there. It’s inventory that doesn’t go away when you don’t fill it up.”

As a result, he says, “the value of buildings can go down very, very quickly if demand drops, vacant space builds up, and rents fall.”

As for the housing slump, “it’s a tricky question” as to whether it’s over, Case says.

“If you look at all the quantitative numbers — existing home sales, new home sales, pending home sales — all the indications of the volume of sales have been up for three to four months now. House prices are sort of the last factor, and they’re up now for two months in a row, which means I think we’re at least at something like a bottom.”

But that doesn’t answer the question of whether the recovery will be fast or slow, Case points out.

“There are arguments on both sides of the recovery question.”

As for foreclosures, “we did about 5 million home sales last year, and about 1 million of them were auction sales out of bankruptcy,” Case says.

“There’s a lot more in the pipeline, and certainly the administration hasn’t unclogged that pipeline. We have to do a lot more to get it unclogged — restructuring, short sales, and get that stuff out of there.”

It will take time to clean up the foreclosures, Case says. “In fact, resets coming along next year could produce further problems for the housing market,” he says.

But Case says falling home prices are a bigger problem than foreclosures.

“If house prices stabilize from here, then the 2008-09 book of business won’t have the number of foreclosures, because the collateral will be there.”

Case says both the public and private sector need to provide solutions. “Any market mess will ultimately be cleaned up by the market. That’s what’s happening,” he notes.

Still, “until the economy itself turns around, we won’t get a complete recovery in housing.”