Real estate prices are not being artificially elevated, they are a simple function of supply and demand. Just build more houses and prices will do down, and they'll go down slowly, without collapsing.
The typical model works like this: The suburbs around a city grow, the city runs out of space. This causes land in the suburbs to become expensive, so they subdivide lots and build more houses. The suburbs now become the city.
And people move to the edge of the city and create new suburbs, and the city grows.
Of course if you read the propaganda suburbs are evil, but in the real world, they are simply a place where the city will eventually grow to.
Maybe that's the problem? People are actually buying in to the propaganda and not building suburbs, and this breaks the entire model?