People who build houses aren't going to bother building housing if they can't at least recover their costs, let alone make money.
With falling prices of houses, rental prices will also fall, making the entire real estate business unappealing. That would have the effect of reducing building material cost significantly, if there's no demand. Builders and developers get paid for their other contributions to the process though, so while their revenue will decline, so will their costs, which will keep things stable enough. The ones fucked will be corporate investors who buy from developers to rent them out to individuals (and to some extent those developers who rely on inflated house prices).
If lumberjacks aren’t paid enough for their trees, they will stop cutting them down. Supply and demand will always come to an equilibrium eventually, if demand plummets, supply will follow in plummeting sometime after.
At least in Australia where I live, the problem isn't really the number of houses (despite the Murdochian headlines harping otherwise.) We have ungodly numbers of vacant dwellings. New houses aren't the solution, new incentives are. This is where the pushing down of prices is important. If companies don't want to build new places, fine, let them rot. In the mean time the multinationals and leveraged-to-the-teeth speculators will be forced to make those empty homes available to the market.
That's an oddly alien view to me. I'd build a house so I could live in it, not to make money from it.
People used to build their own houses, you could order a kit from Sears. You aren’t going to get away without an appropriate amount of resources to buy land, buy the kit, and labor (your own or purchased) to do all the work.
> You aren’t going to get away without an appropriate amount of resources ...
Of course, that's assumed. No-one seems to be saying otherwise.