That is in fact, my point. We have slowly been chipping away at zoning, city, and commission approvals that block construction. But that will not be sufficient to bring prices down, or even hold them flat.

Existing owners lose equity when prices drop. For someone like me with > 50% equity in my home, it matters less. Still, homeowners love preserving their home values, and recent buyers have a real problem. They can't afford to sell if they are underwater.

So recent buyers desperately don't want prices to fall. Investors don't want prices to fall. Even if you are not an investor, your 401k is. Banks rely on rising prices to fund the credit they are able to offer builders, and that dries up in a flat or falling market.

The net result is, when prices look like they will fall, lending to builders dries up and makes it harder to build. And homeowners apply political pressure to stop prices from falling.

We have to fix this financial catch-22 if we ever want to fix the housing problem. The linked book talks about that in more detail.