Many (most?) retirement plans involve downsizing from the large home in a (sub)urban area where they raised children and worked for most of their life to a lower-cost area in a lower-cost house. If my SFH is worth $1,000,000 and my retirement plan involves selling and moving to a $500,000 condo, that's $500,000 of money in my retirement account. If politicians implemented a policy that slashed housing prices in half, suddenly I'm going from $500k->$250k, which means I only have $250k from the downsizing. This is a significant impact to my retirement plan.
Most people are not downsizing by such massive amounts though. The median home price is only $470kish and people aren’t going to accept massive quality of life drop..I.e. very few people are selling $470k homes to buy $150k homes. Thus the gains will be much smaller..
and with a $1M house should have a sizeable 401k specifically so they’re not relying literally on the housing market to retire. Any number of events could cause the same scenario you mentioned.. so I’m pretty much any realistic scenario for most people, tax deferred investments dwarf the small boost you get from buying a slightly cheaper house.
And having more $250k houses now means it’s easier for everyone else to build up a retirement plan.
On the other hand, we’ve made it so new condos are so hard to get built that a 2 bedroom condo in a walkable neighborhood (which you likely need when you retire) is the same or more expensive than a 4 bedroom suburban home. In order to be able to downsize, you need the smaller unit to be less expensive than your current home, and in many markets right now that’s barely, if at all, the case.
> a walkable neighborhood (which you likely need when you retire)
Really don't agree with this -- retiree doesn't mean "decrepit". You're still very capable of driving. My own parents recently retired to a rural area in the US, in a neighborhood with other retirees, where they're a 5 minute drive from the nearest grocery store and a 30 minute drive from the nearest "city" of ~20k people.
It's very walkable in the sense that there are sidewalks and parks, but not in the sense of living in a downtown core with public transit access to essential services.
I don't think it's safe to bank entirely on driving-as-transportation in old age. My grandparents and my partner's grandparents all live(d) in unwalkable places in the US, and it was hell on their families when they slowly lost the ability to drive. You somehow have to either drive them around yourself (expensive and a massive time commitment), move them in with you, or move them into a retirement community when they eventually lose the ability to drive safely around others. It's inevitable!
