An important characteristic of the real estate market is that it is mostly composed of the present stock of buildings, a so called stock market. It differs from a flow market like agriculture where the stock is relatively low compared to annual turnover. This characteristic means that the real estate market can only slowly adjust to shocks in demand.
Because real estate is a stock market, the invisible hand of the market dictates that a downward demand shock has two effects. First, because the supply of buildings cannot easily adjust to this new reality, the only viable route is vacancy or a sharp drop in prices. When owners assume a temporary shock, vacancy might be feasible, but when the shock persists the price will drop. The second is that the relatively small flows that do adjust the building stock take most of the burden: construction drops strongly, more than the initial demand shock, and demolition rises strongly.