[lawnchair_larry]

Still not correct. Materials and labor costs dwarf regulatory costs, even in hot markets.

The market does not inflate price, the market assigns value. In a hot real estate market, prices are value-driven, not cost-driven. In quieter markets, where supply of land is high, and builders are not booked out 1-2 years in advance, prices are cost-driven.

[dzhiurgis]

Yeah but... Real estate market gets hot because of restricted supply...

And supply is set by regulation, regardless of cost...

[lawnchair_larry]

Supply is definitely not set by regulation.

[okcando]

Artificially restricting supply seems to be the function of zoning laws and similar. If laws governing a property preclude the building of and usage as, say, high-density housing, then the supply of high-density has been restricted by regulation. Consequently, prices for property that has been enabled for high-density goes up. And because the demand for high-density housing is driven by the greater pool of demand for housing of all kinds and there's less housing overall to go around, the price of low-density housing also goes up.

I don't know what's going on in any particular place but the potential for regulations to affect supply and demand is clearly there.