You can only raise prices if you can find buyers who are willing to pay. If you used this pricing model as a real estate agent you would find yourself completely unable to sell houses pretty quick if, for example, people started moving out of the area. In that scenario there would be more houses for sale than buyers, and the real estate agent with the lowest price is the one who will actually get the sale (and if you’re still increasing prices that agent won’t be you.. you'll be going out of business).
This is why people can’t increase prices forever - you have to lower your prices if the buyer has a lot of good alternatives to buying your house.
To influence the price of housing you need to increase the number of good alternatives for buyers. You can do this by driving people out of the area (lame), or you can build tons of housing.
This is all based on one of the fundamental ideas of modern economics, the supply and demand model[1].
"Craiglist is ambivalent about being a business. This is both a strength and a weakness. If you focus on the areas where it's a weakness, you may find there are better ways to solve some of the problems Craigslist solves." - Paul Grahamhttp://old.ycombinator.com/ideas.html