Lang refers to his explanation as dual housing markets. In brief, here is what he says. Although houses have a lot of characteristics and so do locations, a useful simplification is to say that one dimension of relevance to buyers is how urban a house is (that is, the number of city-like features it has) and how urban a location is. More specifically, one of the things that can explain the price of a house is the total amount of urban-ness of that house in that place. The total equals the amount of urban-ness that the house has, plus the amount of urban-ness that the location has.So what you're saying is, prices can rise for both urbanity and suburbanity (invented word?). Wow. I'm dumbfounded how that makes any sense.
How about we use a different formula and suggest that housing prices rise (in relation) based on proximity to amenity. Yes, certain people prefer urban lifestyles and others, suburban, but why are some areas in urban locations high priced while others lower? Same goes for Suburban, where the two price points tend to be grossly disconnected, i.e. isolated in single-income pods, generally on a continuum in opposite directions.
An urbanite is willing to pay more for the amenities of their lifestyle: walkability, diversity, visual interest, social interaction, choice, variety, access to multi-modal transportation, etc. Put simply, the efficiency of every day life and the invaluable synergy of the spatial relationships provided by density, which often means increased cultural and sporting venues among other draws.
A suburbanite (in relationship to other suburban locales) will pay more for space (both in the house and land consumption), privacy, and any particular perks that a particular neighborhood might provide: potentially schools (but that is a larger policy and socio-economic issue), homogeny, yard for kids (see: land consumption/space), safety (real or perceived), etc.
Where everything gets skewed (see: the last fifty years) is that we've subsidized suburban living making it cheaper when it should actually be more expensive because of the land consumption and infrastructural extension that it requires. While there should be affordable and expensive (amenity-laden) options in both cases; the average should be inversed because of the shared cost of density making urban living cheaper.
What other reason could there be? Rhetorical question.
DEMAND, particularly pent up demand. Want to know why San Francisco and New York are so expensive? There isn't enough housing supply to keep up with demand. A statistic I read but can't recall the source suggested that while 25% of the population is willing (and wants) to live in a walkable, urban environment only 3% actually do/can because of supply (or lack thereof) and in turn, cost.
So why are housing prices falling? Well, two reasons. They are falling in boom areas because of overbuild due to mortgage shenanigans such as Miami, but besides that, as mentioned above, there is a tremendous over-supply of single-family housing, particularly in areas lacking amenity: