[wott]

Someone who wants a house is not really willing to have an apartment. Someone who is ready to put this amount of money in a house is definitely not willing to get an apartment.

[matthewowen]

Yes, but some people would prefer to have an apartment and save some money, and that would overall create less demand for the available homes.

End result: people who want apartments get them, people who want houses still get them and pay less for them too.

[zaroth]

That's not how it works. Anyone in the market for an apartment isn't driving up demand for this $2.4m $1,200/s.f. house.

[asdfologist]

Lower apartment prices would cause a downward pressure on overall real estate prices, including for houses. As an extreme (and absurd) example, consider the scenario where apartment prices are zero or even negative. Demand for houses would drop dramatically, causing their prices to also drop.

[zaroth]

They are not perfect substitutes. If they were, no one would be paying $2.4m for this postage stamp in Sunnyvale.

There is plenty of supply below $2.4m. The 20 people who made offers on this house weren't interested.