New construction homes are almost universally Value of Land + Cost to build structure + ~10%. The supply/demand aspect of new construction cost only factor into the value of the land, and how increased demand can cause increased labor/material costs.
It's not like real estate developers pull numbers out of a hat to determine how much to charge. Most areas will have several major developers in direct competition to attract new home buyers, and if their costs every get out of hand people will just start buying land and managing the build themselves.
What would you advocate to lower the cost of housing by 50%?
Personally I suspect the land cost is one huge part of why people don't build their own homes today. Today's version of the sears catalog home would be like "2 dozen people buy a small plot of land together in/near the city and build a condominium to share the land in a cost-effective way". But while random people can build a basic pre-fab home with lots of determination, they probably can't build a 5-over-1.
It's not like real estate developers pull numbers out of a hat to determine how much to charge. Most areas will have several major developers in direct competition to attract new home buyers, and if their costs every get out of hand people will just start buying land and managing the build themselves.