If the fundamentals aren't there, then prospective homebuyers can simply keep renting and saving while they wait for the market to rationalize. You wouldn't wan

If the fundamentals aren't there, then prospective homebuyers can simply keep renting and saving while they wait for the market to rationalize. You wouldn't want to be a long term buyer in a market that you believe is experiencing a speculative bubble. The people locking you out of it are (perversely) doing you a favor, by saving you from being one of their "greater fools." I suspect that capping supply in the face of immense demand is what makes urban housing such a great investment. If we allowed enough supply growth to make urban housing markets underperform equity markets (while still rising!) much of that capital would lose interest. You speculate on things that are going up, after all.