Yeah bugs, where I was going with this thought is that I think during the boom years, supply was limited by the bottleneck of designing/permitting/building and this constricted supply (coupled with marketing and buyer mania) fueled the price increases.
If we are now back to 2004 prices, then it would seem to me that home builders could make good money at these prices, IF they can get the land at 2003/4 prices. Even if we collectively have “too many” houses, if developers can build and sell stuff lower than what resellers are willing to take, then why wouldn’t they keep building and selling until they reach a true break-even proposition?
I am just trying to think this through from the point of view of a home builder who is approaching development & construction decisions from a cash flow and/or survival point of view.
It doesn’t seem obvious to me that individual builders will stop producing homes (they need to in order to generate cash) even if they – collectively – would benefit from reduced supply. They are like OPEC, reduced supply increases price, but they need to build & sell to generate cash. Right?
