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The real irony is that we don't even need to have houses go down in value. Condos? Sure. But single family homes? The land itself will be what has value. As an area densifies, the land a single family home occupies becomes more and more valuable. And there will always be some folks that will want to live in a SFH. As more and more infill happens, what SFHs do remain become very premium items. Imagine if somehow a single family home existed on a quarter acre lot in Manhattan. That home would sell for a fortune, even if the house itself were a mobile home on blocks.
Owners of SFHs have nothing to fear, in terms of loss of home value, from densification. Condo owners will not see as much appreciation if barriers to housing construction are removed, but SFH owners will continue to do quite well.