Holding off would only work if they actually believe the market is turning around sometime in the next 2 years. There are some bulls out there saying that yet, but the builders would have to really want to believe them at this point.

They probably took out construction loans to get as far as they did with the lots; those loans are short term instruments and do not have favorable terms for holding the lots for any length of time. Lenders aren’t going to be that hot to extend those loan right now, either.

Holding the lots only increases their loss, especially in a declining market. Their only reasonable choice is to either build them out and sell them off ASAP or to sell the lots off to another developer at a loss. They’re both bad situations for a builder, so they have to choose the lesser of the two losses.

What they could do is to reduce the size and quality of the house they put on the lots. It cuts way into their profits but it also cuts their costs and the houses could be priced even lower to attract those buyers who are out there.