The single biggest “cost” increase the builders have actually incurred is the cost of the land. If a builder bought land in 2002, they can’t very well discount past retail SFR values of 2002 without running into losses.

As I see it, a 50% decline off peak basically has to result in massive losses for the builders who are still exposed. A 70% decline puts most of them out of business, or at least, cut back to their management staff and sitting in hibernation while they wait it out.

FYI, new home production in SD County dropped from 12,000 – 13,000 per year in the late 80s thru 1990, to as low as <4,100 - 5,100 during the years of 1992-1997. The 12,000 mark didn't come up again until yr2000 (12,166).

And the spike of 1989 was about 1/3 the size of the spike we just came off of.