Available homes is not a constant. New structures can be built, inefficiently utilized land can be rezoned, and transportation infrastructure can be improved to

Available homes is not a constant. New structures can be built, inefficiently utilized land can be rezoned, and transportation infrastructure can be improved to increase the effective size of an area. You might seriously run out of living space in an area like Manhattan, but in 99.9% of cases increased demand should lead to increased supply in a functioning market.