Ironically, if we didn't price things in dollars and instead used a monetary asset with a fixed supply these distortions would disappear. In other words, in a hyperbitcoinized world housing prices should be more inline with the actual value they provide rather than the distorted "number go up" they are now.

But you don't even need Bitcoin to see this. Try pricing houses against literally anything else. For example in 1970 a house would have cost you about 95,000 cartons of eggs. Guess how many cartons of eggs a house costs today? About 90,000.