You are still building equity as opposed to throwing money away to a landlord. And there are a lot of other intangibles such as stability (no more rent increases or evictions) and freedom to modify/alter/improve the property. These are probably much more important features to potential home owners (especially ones considering/having children).

And another thing to consider, for most homeowners a hot real estate market only benefits them if they are willing to move to a lower priced market or downsize their home. Moving laterally or trying to upgrade during a hot market means you are exposed to the same percentage of price increases as everyone else. The only people that really benefit from hot real estate markets are investors and landlords.