The rebuild cost, as estimated by my insurance company, is more than half the total value of my house. And I live in Seattle, where land is relatively expensive. Construction cost is not "almost nothing" by any means.
Also, land is not scarce in the south and midwest which is we haven't really seen a rise in price per square foot in 40 years [0] as it is basically all construction costs as you can build a new home in a new suburb at the edge of the city.
In a city, most construction is going to involve demolishing the previous structure. So you could argue there isn't much value in pricing construction sans the cost of demolition.
