I'm discussing monetary inflation because that is the "inflation adjusted dollars" unit that is used in the article.
the relationship you're trying to examine between home prices and monetary inflation is an indirect one at best. the banks that lend home mortgages are retail banks. the banks that lend to other banks (and borrow from the Federal Reserve) are investment banks. they are related but not identical.
Sure, the investment banks form a layer of insulation between a homebuyer and the federal reserve, just like the retail banks do. But ultimately, every dollar of a home loan exists solely due to the collateral of the asset itself. (since they will ultimately pass off the loan to a bank with access to easier money). Thus an upper constraint on home prices does not come from the amounts banks are willing to lend (since the valuation relationship is circular), but only from what borrowers are willing to pay in monthly payments, divided by the interest rate.
I cannot easily determine the exact adjustment the article is applying for "inflation adjusted dollars", but most every time I see such an adjustment it is based on estimates of purchasing power, not monetary supply.
the relationship you're trying to examine between home prices and monetary inflation is an indirect one at best. the banks that lend home mortgages are retail banks. the banks that lend to other banks (and borrow from the Federal Reserve) are investment banks. they are related but not identical.