At first the significance of it didn't sink in. Then he remembered Castiel. Castiel staring at Matty all night instead of sleeping. Castiel's bafflement at the concept when he'd become human. "Angels don't sleep."
So it would follow that they didn't dream. "But you're dead." This dream was confusing in ways that he was not used to. "I'm dreaming of you dreaming and you're dead. I've seen you die."
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So it would follow that they didn't dream. "But you're dead." This dream was confusing in ways that he was not used to. "I'm dreaming of you dreaming and you're dead. I've seen you die."
What was his mind doing?