I second what other commenters have said about low interest rates. They cause us to make economic decisions that we would not normally make such as buying a bigger house. Also, the requirement to have 20% down verse buying with a low down payment adjustable rate mortgage has effects on the price. People's time horizon to sell has changed over the last few decades. No longer due you see the majority living in their houses for 30 years. People have much shorter time horizons to sell.

One the interest rate point.

Think back to the 1980's if your mortgage had 10% interest, how much could you afford to buy? On the flip side, if your a seller how much could you sell your house for with 10% interest rates.

There was some figures out there that stated something along the lines that for every increase in interest rate by 100 basis points, there is a ~14% decrease in the price a buyer can afford.