How do you explain the housing crisis? The backlog of unsold homes that developed in many parts of the country says to me that prices didn't fall far enough. That is, due to the way market participants act, housing prices are "sticky" like wages. Sellers (mainly banks) apparently would rather let a house sit vacant and unsold than set sale prices at levels that would allow the market to clear (and take big capital losses).
I'd say that it's clear evidence that real estate prices are inflated -- not by zoning regulations, but by perverse incentives produced by the way real estate lenders keep their account books.
This falls in line with the picture that, due to the loan bundling practices that were encouraged by US government agencies Fannie Mae and Freddie Mac, the owners of most housing loans weren't the same as their originators and hence, this created an incentive for the originators to make loans to people who couldn't pay them in the long run. Which increased demand in the housing market due to allowing these borrowers to enter (their shaky financial status would have been excluded them if they hadn't had access to the questionable loans), which caused prices to rise. Eventually a lot of those borrowers (predictably) went bankrupt and exited the market, dumping the extra supply (now-vacant houses) on the banks (which obviously promptly put them on the market, since being homeowners is out-of-scope of most banks' business plans -- they'd much rather be the creditors of homeowners, a role they're much better set up to play).
But prices couldn't fall again and return us to the status quo ante, because not enough sellers were willing to go with Option A: Sell for whatever buyers are offering, and take an immediate capital loss in their books.
The banks were more willing to go with the alternative, Option B -- tolerating the damage over time of the taxes and expenses involved in owning a vacant house for many months or years. Although the costs of Option B would, over a sufficiently long period, dwarf those of Option A, the short-term incentives of upper management -- encouraged by short-term thinking common among investors and, indeed, endemic in the financial industry as a whole -- made Option B more attractive due to its better short-term results.