Because the other side of supply is demand. Demand increased as 2 income couples now want to both have a home office to work from home, salaries went up from the great resignation, savings increased due to lack of anything to spend on, and rates were incredibly low. Basically the perfect opportunity that made everyone ready to buy at the same time. Some amount of people moved from a HCOL area to a LCOL area and kept the same salary so they could afford to spend more as well. This all led to the people thinking they need to buy now or they are going to miss out which further increased demand.
I deeply suspect it's got a lot to do with interest rates pushing investors into the residential housing market who never would be there outside of these conditions. When a market is entered by participants with vastly more resources than previous market players valuations change vastly.
Housing valuation over the last decade is not entirely dissimilar from crypto valuation over the same period.
But while they are both irrationally overvalued, you can’t mine for new housing stock.
Building was paused for about a year (Covid and lumber prices), so there are a ton of new builds that didn't happen or got delayed. New Construction was already barely keeping up or falling behind pre-pandemic. Covid also caused a massive swing in what was desirable housing, small city apartments are a lot less attractive when lockdowns were possible so demand moved to places that weren't prepared for it.
I think Toronto has a huge problem with foreign investors driving up housing prices, so probably more of that
In the US, about a third is being purchased by Wall Street investors. There's a relatively recent Washington Post article about it.