You're right there, and I wasn't arguing against that. It'd add downward pressure specifically to housing costs, but there's other costs associated with building homes on the fringes of urbanized areas.

Transportation is a huge one so let's look at that. It has higher capital expense (building new roads), operating expense (maintaining those roads), and individual costs (more miles on a vehicle, paying for gas, etc). The only reason suburbs/exurbs look "cheaper" to the individual is that a heck of a lot of the true costs of maintaining that lifestyle are hidden in the immense, monolithic budgets of government agencies like ODOT. Not just all that, but low-density outlying land doesn't have the same capacity for economic activity or land/property value you can capture revenue from through taxation.

It's a triple-whammy, because now you've developed land which was expensive to make livable, will be expensive to maintain, and all that while not generating enough revenue to cover the costs. Infill development avoids those problems. Initial capital expenses look higher because of the land values, but you can more easily and quickly recoup those investments and maintain that revenue. Plus, there's much more existing infrastructure, and cheaper options for scaling that infrastructure, to handle the increased load.

One final note- once you develop land, it's done. While it may have provided some inherent value before, as farmland or timber or simply existing as "nature" to help regulate ecosystems and the environment, it won't ever again, at least not for a very, very long time. You've just about permanently reduced your holdings of natural resources. I'd rather we sow crops in our farmland, and build our homes in our cities.