You’ll get some comments from people who know more than me, but I’d like to add this:
When housing crashes, it’s the value of the land that is going down. That is the speculative component. Construction costs might pull back a little bit as demand eases, but the land will take a hit.

Thus, no matter what the land holds, that property will take a hit too. Apartments, houses, vacant land, commercial and industrial sites will all be worth less because the land underneath is worth less.

A second factor: Lender money will tighten, as foreclosures take down many banks, and others get scared to lend too much. This makes it harder for anyone to get a commercial loan, affecting that market too.

Third, from your comments it’s not clear if REIT properties are overvalued or not. You said “Apart from increased valuation due to psychological factors…” It sounds like REIT holdings did experience a bubble run-up; they are overvalued. Then you say “REITs are not exposed to the malaise of the recent runup in the real-estate values.” This is a contradiction of the first phrase.

Last, are you positive they are cash-flow positive on the rents?

Don’t REITs follow the direction of the residential RE market, or are they subject to different forces?