The main reason for this is very simple. It's because housing is considered a "safe asset", and this means that lenders are willing to lend at low rates for housing purchases; they think that if you fail to pay, at least they'll get the house, and it's very unlikely to go down. This is why you can borrow money with a mortgage for 2~3%, while borrowing money to buy, say, food, costs 20%.
It shouldn't be surprising that when the cost of debt is very low for a particular asset class, that asset class will end up more highly leveraged than others, and will be more sensitive than others to changes in the cost of borrowing.
To make matters worse, the more that banks are willing to lend for house purchases, the more money they effectively add into the system, driving up the price of housing further, which also adds to the illusion that real estate only goes up...
And, the perceived safety of this asset makes homebuyers more willing to spend a ton of money on a housing purchase. It's how the middle class is expected to save for their retirement, after all...
Housing is also the main asset class that couples the financial world of the "asset economy" into the consumer world of the middle working class. While most people don't worry too much about the price of Amazon shares -- and if they want them, they'd be about as happy buying $1000 worth of shares whether that gets them one share or ten -- there's no ignoring the effect of real estate prices on families, peoples' lives, and savings. Governments care a lot about this and are unwilling to let the bubble pop.
Finally, and perhaps most importantly, when central banks are worried about deflation and a slowdown in the economy, they react by reducing interest rates. The hope is that this increases consumer spending, by increasing confidence in borrowing (which increases real estate prices). One of the mechanisms for this is the "wealth effect"; if people feel richer (because their house is worth more on paper), they are willing to spend more, and this consumption drives the economy. It seems that since the mid '90s, western countries have been terrified of ending up in a deflationary spiral like Japan, and are pulling that lever again and again to try to stoke consumer confidence. However, it's quite possible that it's ineffective, and at any rate, it's going to be hard to push it further than it's at now.