the problem is there is market failure. The Housing Asset is more valuable as a financial instrument than the actual utility it provides. This is why you see homes sitting empty in Manhattan.
Normally when prices go up, supplier (homebuilders) have an incentive to produce more housing, countering the increase in price. However, many cities (SF is a great example) make it very hard to build new housing. Restriction on supply with increasing demand -> price of homes go up.
Unfortunately they are not making any more land.