Housing location is a matter of trading off between rents and transportation costs (all else equal). When transportation costs fall, people are able to pay more in rent. Sometimes they allocate that surplus money to nicer digs, sometimes to more square footage. But when transportation prices rise, people need lower rents--temporary fluctuations can be managed by curtailing travel (which can't be sustained long-term). So, when the price of gas spiked in 2008, a lot of households couldn't afford their homes. So they stopped paying. Which tanked the value of the mortgage back securities (MBS), which froze the creation of new MBS, which overloaded loan agencies with mortgage they couldn't resell, which froze mortgage lending, which destroyed demand for mortgages, which wrecked demand for homes, even as supply continued to expand. As house construction is a process you can't stop midway, any more than you can stop making an egg, additional housing supply continued to come online. And so housing prices went into freefall for a bit, and we stopped producing more houses entirely.
By which point, the context had changed. When housing production ceased, with it went the entire institutional apparatus that been making money on the process of converting raw land into homes. In much the same way that the Great Depression wiped out local banks, the Great Recession wiped out local homebuilders, mortgage originators, and financiers. The survivors were much more risk-averse and less speculative (something reinforced by additional lending regulations). And no one was willing to invest in new housing, while there was existing housing out there selling for beneath its production cost. It wasn't until that 'latent supply' cleared that it made sense to produce more housing, and there isn't an increase in the number of 'new starts' until 2012. And, as the chart shows, the gas prices that had made all the peripheral homes reasonable and affordable didn't return until almost 2014. So even if your transport costs had been acceptable in 2008, it wasn't until mid-2014 that the transport/housing cost equilibrium again made those homes attractive to buyers. And even when gas prices fell, there is also the awkward reality of expectations: Expectations about gas prices set between 2005 and 2015 were very different than 1985-2005.
Further, the demographics of demand had shifted and the "Great Housing Reversal" had begun. An oversupply of single-family detached housing had been predicted for decades, but the oversupply was worse than expected, due to a quirk in Millennial demographics: Less marriage hence and less homeownership. Fewer married couples mean fewer kids, which means living in a rental apartment is more acceptable, for longer, even after marriage. It also meant the people living in apartments were older and hence had higher incomes and were willing/able to pay more in rent. And that has kicked off a generational bonanza in apartment building, aided and abetted by increasingly-political-engaged renters (YIMBY), overcoming the supply restrictions imposed by the homeowner cartels.