I think you're operating on maybe 5+ year old thinking on this problem. Post-COVID, the "exurbs with hour long commutes" have become significantly more desirable, as people have gone fully or partially remote. The "penalty" of the long commute has gone down while the benefits of space, affordability, and community type have gone up. The world is obviously figuring out the Return to Office thing but overall the commute is a less big deal than it once was.

This dynamic means that folks who own what you correctly categorize as owning "detached single family homes in (or close) to desirable cities" who no longer care about the commute might be overall willing to sell these homes in favor of larger/more affordable homes further out, freeing up these homes to those for whom city proximity still matters.

I think there are really two core demographics at play with a small middle. There are those who are all about the city life - don't want a car, don't want a house, want to walk to work and to the tinder date, be around a large number of diverse people and experiences, etc. Then there are those who primarily orient their life around home/family and want the space/affordability. Distance to city mainly matters as a factor of the commute, which itself is less relevant than it was before.

Then there's the relatively smaller group that both wants a house and needs to be close to the city life. This group will continue to pay the highest costs because they have the highest demand but I think that's reasonable.

The number of people working remote is still fairly small compared to the overall workforce. Many jobs simply don’t allow for it. If you’re in tech you’re probably overestimating how big this shift has been.