If anything, average people are affected more. When REITs and the like lose money, at least those losses are tied up to their company. Worst case, they go bust

If anything, average people are affected more. When REITs and the like lose money, at least those losses are tied up to their company. Worst case, they go bust - but their owners aren't personally responsible for the losses. Now, imagine being some average tech-Joe that bought a house for $2M last year (almost entirely on a mortgage), the job market goes to sh!t, and subsequently the housing market follows after. You're forced to sell, and take a 20% loss - selling it for $1.6M You're now $400k in the red. That's a massive debt to carry around, if you're not able to continue in some high-earning job. This is something you (unfortunately) see in cities that are heavily affected by boom/bust cycles. Price volatility can be a real killer if you've stretched your resources to the max, even if the market rebounds. Solvency can be a killer. (But as for why this could affect average people - I'd imagine there being some correlation between business real-estate, and private real-estate. The general real-estate market has a big market psychology component to it. So hysteria in one market could very well transition to another)