As I watch these builders ratchet their prices down, I can’t help but laugh a little.

Remember that one of the arguments our permabull friends used to make about the New Paradigm/Soft Landing/New Reality was that costs had gone up and the prices simply couldn’t decline past costs? I do. Apparently these builders can reduce costs and stay in business, and the reason for that is because costs had almost nothing to do with the extent to which the prices increased. Everyone in the process, from the materials suppliers to the agents were pullling in outsized profits as result of the demand and the market psychology.

Yes, it costs more to build here than in most areas of the Midwest; but except for the government fees and possibly the workman’s comp insurance the difference is only about 15%. Not 300% like the bulls would have us believe.

From the land to the selling agent’s commission, there’s gas all through the pipeline that can be purged to get us back to $300k tract houses if that’s where the demand (and the mortgage interest rates) ends up.