I think you're missing the fundamental economic issue that drives all of this. It's the provision of essentially infinite amounts of credit. This is done by government, not banks. Essentially all home loans come from Fannie Mae or Freddie Mac, banks and finance companies are really just front-ends for them and sell their loans to the government once financed.
Given infinite credit, any scarce but necessary resource is going to be bid to absurd values.
It is by no means being a hippie to assert that government should not distort the market for credit, and to expect that urban and suburban land values would return to more realistic rates once the distortion was removed. Too bad that lots of people have already invested in unrealistic land values. They would have to lose.