You are thinking that only ‘printed’ dollars are part of the money supply. They aren’t. All leveragable assets are. This includes homes. With values in homes down, the home ATM is also down.
The inflation occurred during the run-up in home prices. People would extract (convert to money) any significant gain in the value of the home.
Now all values in homes have dropped significantly, many time leading to foreclosure where the bank has to recognize the drop in value. The crash of housing and several resulting banks has resulted in a reduction of the real money supply.
