This misses the two biggest problems with prices going down: 1) if losses are small, people will refuse to move / sell, reducing housing stock. 2) the really,

This misses the two biggest problems with prices going down: 1) if losses are small, people will refuse to move / sell, reducing housing stock. 2) the really, really big problem is if prices go down enough that people have to start taking big losses when selling, or if it stops making sense to pay the mortgage. People would instead default on the mortgages, sending our economy into a 2008-like crash. This would lead to less construction (again) and more housing capture by the wealthiest people and corporations. The biggest problem we have right now is insufficient supply. Builders won't build if they can't profit; if they can't sell at relatively high prices, they can't profit.