House price busts can have a catastrophic impact on the economy, more severe than a stock market crash. These papers discuss the effects of house price crashes.
When bubbles burst
IMF World Economic Outlook, Chapter 2, April 2003
Compares the impact of equity price busts and house price busts. House price busts have a much more significant effect.
Comparing wealth effects: the stock market versus the housing market
Carl Case, John Quigley, and Robert Shiller, November 2001
Changes in housing wealth have a large effect upon household consumption.
House prices and economic activity
OECD Economics Department, Nathalie Girouard, January 2001
Changes in housing wealth have positive effect on the growth rate of consumption for Japan, U.K. and France, negative for the U.S. and Italy, and no influence for Canada. Using gross housing assets instead of housing equity allows for a significant and positive effect for the U.S. and Canada.
Which parts of the world are most attractive for property investment today?