If - hypothetically - I had a ton of money and buying another house or two or fifteen wasn't a big deal, wouldn't there be a clear-ish signal that I should stop my demand for more housing lest too much supply screw with my income? I would also have an incentive to deploy some of my resources/capital to making sure that the supply of housing is juuuuuuust right for my extractive needs.
Thats what I'm trying to figure out myself, which bank is going to give out loans on a depreciating asset. Funding will dry up as supply increases.
It is all fine as long as repayments on principal are faster than depreciation. Might mean larger down payments or shorter durations. As long as you can reasonably expect collateral to stay above principal math does work out in my mind.
Car loans have been a thing. And they attach to depreciating asset.