Without going in to your level of economics nuance (close to unreadable for lay person), housing is absolutely elastic in that purchasing power plays a huge rol

Without going in to your level of economics nuance (close to unreadable for lay person), housing is absolutely elastic in that purchasing power plays a huge role. It is somewhat differentiated due to neighborhood amenities and other factors, but within those a house/condo are a commodity. The bigger issue is that you have land use lock-in due to the tax advantage and zoning. In simple terms, if you take 0.5 acre lot in Los Altos within close commute to Apple, Google, Facebook and Amazon. If taxes were market rate, then a lot more inventory would be available because these “assets” would be too expensive to just keep. If zoning was not a factor, then the lot prices would be even higher due to being able to cram in more shared use spaces (condos) into it. Of course, all these have extreme negative externalities (impacts) on those living around these lots and those living on them. That’s why we need some protections and middle ground between these as a society.