Supply and demand isn't that simple especially in housing or other assets seen as investments. Rising prices in housing increases rather than decreases demand. People want to get on the ladder, banks throw money at people with no incomes and the world goes mad when house prices go up. It may be than supply can do a little to moderate the effects of the backwards demand curve but I don't think it can generally fix it.
Where there is a real building boom (Ireland/Dubai/Spain... 2004-2008, probably much of China now) the building industry can actually be a large part of the economy bringing in migrants (and housing demand) into the area temporarily increasing demand. Also the building tends to happen when prices are rising and people build and purchase speculatively based on the rising prices. So in the short term affordability falls due to the increased demand. In the slightly longer term prices start to fall and the building stops and therefore the demand falls further and no one will offer a mortgage to buy anything so affordability is still rubbish.
[Edit: typos. Added Spain to list of 2004-2008 boom areas and put a "probably" on China]
Where there is a real building boom (Ireland/Dubai/Spain... 2004-2008, probably much of China now) the building industry can actually be a large part of the economy bringing in migrants (and housing demand) into the area temporarily increasing demand. Also the building tends to happen when prices are rising and people build and purchase speculatively based on the rising prices. So in the short term affordability falls due to the increased demand. In the slightly longer term prices start to fall and the building stops and therefore the demand falls further and no one will offer a mortgage to buy anything so affordability is still rubbish.
[Edit: typos. Added Spain to list of 2004-2008 boom areas and put a "probably" on China]