I really don't think so. If demand is effectively unlimited, then I highly doubt it is only unlimited at exactly the current housing prices. Some significant portion of the housing is not under rent control (most people I know don't live in rent controlled units) and some portion of the supposedly effectively unlimited demanders should be willing to pay more than the current prices.

Maybe they switch to alternatives (larger, further away) at around this price level. Other commentators have noted that you don't pay much less further away, just get much more house than you need. An increase in supply and subsequent drop in prices would be absorbed immediately given the other conditions (appears to be the claim).

Is it, really? The entire current population of the Bay Area is tiny (7 million people across 101 cities, less than a million in S.F. proper). Compare:

Tokyo metro area: 37.8 Million

Mexico City metro area: 21.2 Million

NYC metro area: 20 Million

If demand where truly unlimited, then building up S.F. to Tokyo standards or above over the next few decades should be practical, since that level of demand would provide the funds for the growth. Of course, what is really going to happen is that demand will likely stabilize around or below the 15 million threshold for the entire Bay Area.