The issue is that it's ridiculously expensive. You have to pay an inflated price for an existing, perfectly fine home. Then you have to pay to have it demolished. Then you have to pay to build a brand new home. It's going to cost >2x what the resulting home is actually worth.
When the old homes decay to the point that they need to be torn down, then they will be. But destroying perfectly good houses is just too expensive in this market.
