Housing is a huge economic sector. If any part of the market goes soft, we have a surplus of homes. Construction stops immediately. That will put a lot of people out of work. A surplus of housing affects the entire housing market, so property values will fall. There will be good deals for people who can afford them, but homeowners who are planning on refinancing to remodel or put the kids through college will be out of luck. People who can't afford to buy homes rent them, so the rental market will inflate. This will be tough on students and the poor. Young people will move back in with their parents. Both rents and purchase prices fall as you move away from cities, so some workers will move to distant suburbs. This will create more traffic problems but boost the economy for nannies, convenience food, and other commuter-support industries. A slump in housing is one thing that can trigger a serious economic downturn. But it doesn't have to happen. We have a global economy now so what happens in one sector in one country may have limited impact. In any case, the sky is not falling. Things won't get that bad.
