There are two answers to your question depending on how cheap somebody is actually trying to sell it.
1. Hosting is getting cheaper by the day. With a 500 GB hard drive only costing a couple hundred dollars then of course hosting is going to be getting cheaper. Also, there are more and more hosting providers coming into the game every day. When a customer has more options to choose from the companies must cut back on their prices to produce more sales.
2. Many companies also oversell there hosting. An example of this would be a company offering 100GB disk space and 1000 GB Bandwidth for 4.99 per month. Everybody knows this is not possible. These providers rely on the fact that their customers won't use all the space they are allowed to in the plan. This kind of overselling can get many companies in trouble in the long run.