This is a sign that a few skyscrapers of apartments and condos is not enough to match demand. But (there's a little law out there called "Supply and Demand", if I'm remembering right), there's a correct amount to build that would. Saying that the necessary supply to meet demand is infinite is quite silly.
> >"There is no free market in housing." Not true. Go visit large geographic areas that are not 'destination cities' like Stockton; Modesto; Vallejo.
What you're seeing here is that we have land-use policy that allows us to sanely build cities up until a point, whereupon speculation over land value will make new development economically and politically infeasible.
Nobody wants the extra land in Stockton very much, but everybody wants Palo Alto land. The problem is that the land is held for very little cost by people who don't want to actually use it. (The market is giving a very strong signal, via price, that is should be developed for housing with much higher density.)