They don't doesn't mean they cannot. Even if Playstation 9 comes out, if the developer choose not to be photorealistic than the games will just be stylish graphic instead photorealistic (which is i don't mind). And yes there is always be a new bar in each new generation, but the bar will not be noticeable from now on. The problem is not the technology it self or the spec, but more of our limitation on seeing a higher resolution more than 16K. In games we don't need an artist rendering every atom and particle of our skin. So the goal on physical based rendering already achieved (except it just need a proper Ray Tracing)
But the point to my comment is we are already in the situation where photorealism on gaming will be hard to notice on each generation onward. Instead Developer will strive for physics and world interaction to create a living world and also they will focus on AI and simulation. There is so much to improve on games and that's not just photo realisme.
Yeah we're not even close to photorealism on consoles. Wake me up when consoles reach Pixar quality of animation.
This is photorealism. Granted it takes millions of dollars and hundreds of man hours to produce.
This is pretty interesting video, if you want to delve into photorealism