Economically, I believe that the stutus quo proctect builders. If other industries found ways to build better quality products at lower and lower costs, I don’t see why, if forced, the RE industry can’t achieve the same results.
It’s because those other industries aren’t regulated every step of the way. When you talk about the cost of the land and the cost to build the homes, you are leaving out a very expensive step in the process. If the land is not entitled, a developer will spend many years and millions of dollars obtaining local, state, and federal permits to build. All of this before you can even talk about the price of lumber or labor. These costs have increased substantially in recent years and won’t be decreasing anytime soon. San Diego is indeed one of the most difficult places in the country to build. I work for a land planning consultant and have seen first hand the red tape that developers must fight through at the local, state and federal levels to be able to build. The only reason my job exists is because the process is so complicated that a company like the one I work for can flourish. All these costs are eventually passed on to the homebuyer.
I do believe this is one reason that the real estate bust will not be as drastic as many believe. The regulations in place today will not be taken away once prices fall. The cost to build a home today is substantially higher than even 10 years ago (regardless of price of land, lumber, labor, etc.)
