A quick intro to the "wealth effect" for those of us who are not economists; courtery of The Economist.
In America the tangible impact of the housing slump is plain to see in the number of empty homes and in rising unemployment. There is greater uncertainty about the indirect effects of falling house prices, including the extent to which consumer spending will be held back by the “wealth effect”. Spending is largely driven by how much people earn in real terms today, but it is also affected by expectations about incomes tomorrow. An important part of future incomes is tied up in the assets—stocks, bonds, property—where household wealth is stored. When asset values fall, those who own them are poorer, hence they spend less and save more. When wealth increases, they spend more.
Finally, if the media were solely responsible for the nation's bad mood, the Daily Mail would be creating a nation of suicidal middle class parents. I somewhat think their influence is overstated...