Dave I've actually covered this in a previous post, but I maintain my view that declining house prices are not necessary of precursor of economic doom. If share investors have managed to deal with reduced liquidly from sharemarket losses, so will property investors have to deal with losses in their investment category. Home valuations were reported to have increased 20% year on year, but that has not had the effect of boosting the economy stratospherically. Fluctuations as extreme as those are seldom reflected in actual liquidity for the majority of owners and investors. As prices decline, those that wish to exit the market will do so, some quickly, some slowly, many (most?) with capital gains. As long as employment figures remain reasonably stable, I don't see those declines impacting the overall economy catastrophically.
