Because home builders don't make money by buying and selling houses, they make money by building them and selling them.

mrcode007 5 hours ago | parent | next [-]

This 1000x. Folks don’t get that the primary market != secondary market. Same as pre-IPO stock holder != IPO time buyer.

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estearum 5 hours ago | parent | prev | next [-]

And... how is this relevant?

I'm not sure what you're trying to imply here. You should spell it out explicitly.

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epistasis 5 hours ago | parent [-]

The difference is between buying and asset and producing an asset. Even if RAM costs are falling, it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.

It's entirely different if you're buying the housing already built; there's no productive activity, you're just a rentier and do not benefit at all from falling housing prices.

The differences in interests between an asset holder and a productive builder are night and day.

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estearum 5 hours ago | parent | next [-]

> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.

Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down.

And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.

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gnopgnip 4 hours ago | parent | next [-]

Dr Horton is the largest builder in the US. In q3 2025 they had a 21.8% gross margin.

	▲	eks391 4 hours ago \| parent \| next [-]
		As someone who is not versed in real estate, I don't see why your comment and parent couldn't both be true. Is Dr Horton building homes in Austin? Are the margins in Austin pulling down their average margin? That could explain high profit while dissuading new construction in Austin. *I don't know the answers to either of these questions, but of you do, that could provide some "proof" for either side of the argument, depending on what the answers are.
	▲	smcin 4 hours ago \| parent \| prev [-]
		Their gross margin is a lagging metric on houses they built 2/3 quarters ago, and applied for development permits ~4 quarters ago. US homebuilder gross margins have been declining since 2023.

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epistasis 5 hours ago | parent | prev [-]

It was not clear that it was your point at all! Yes of course, gotta get your return on capital invested or the money goes elsewhere, probably into a REIT that invests in the existing assets and drives up prices even further. Because the demand for housing goes somewhere: either existing owners profit or the people building and alleviating the shortage profit.

Every single municipality in the US I'm familiar with has done everything they can to make it expensive to build and try to remove any profit margin from building. Which leads to capital moving towards piggybacking on the rentierism of the average homeowner, the people who control the policies that make it unaffordable to build.

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estearum 4 hours ago | parent [-]

How do you interpret "which compresses already-near-zero margin on real estate development" if not "the costs are already near the sale price?"

	▲	smcin 3 hours ago \| parent [-]
		Not all new houses sell. Some become shadow inventory, some take 5+ years to sell. If you drive around new developments you can measure the fraction. IIRC, Mountain House (near Tracy, CA) in the 2008-2010 crash was an example of a large new development that did not initially sell and was in serious danger of going zombie, and not having the new schools that had been promised to people moving in.

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pandaman 4 hours ago | parent | prev [-]

There is a difference but not in the way you think. Producing an asset is just buying other assets and labor. The difference with buying an asset is that a part of the assets you bought for production is illiquid for a term of the production. Generally you can only sell unfinished construction at a huge discount during most of the stages. So producing an asset is as same as buying an asset but with a lockout period, when you cannot sell.

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nsnzjznzbx 4 hours ago | parent | prev [-]

But building cost > sale value is possible.

Or land ends up better value left as suburban house than developing up.

Or they build where sale cost - build cost is maximized. I.e. different city.

Governments need to build more housing. Make it bland so snobs can price discrimnate themselves to buy builders' homes. Why thrifts by the government home for value for money (and quality).

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vasco 4 hours ago | parent [-]

You think the government knows better how to identify land that is profitable than private builders? Why? Or is this one of those opinions based on "is OK for the state to pay for it because there's infinite money for my pet project"?

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nsnzjznzbx 3 hours ago | parent | next [-]

Because I grew up in the UK and there is a fuckton of government housing from 60s and 70s. It is ugly but it is housing people.

Government doesn't need to make a profit due to taxation.

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vasco 2 hours ago | parent | next [-]

Hello https://cep.lse.ac.uk/_new/publications/abstract.asp?index=1...

UK public housing is widely known for being shit. Unsafe, puts all the poor people together in a block. There's bunch of crime, and your kids will be likely to stay stuck there or go to jail due to bad influences.

Social housing should be sprinkled around it has been found. So nice example of what I was saying.

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ghufran_syed 3 hours ago | parent | prev [-]

like the fine example of Grenfell tower, a government housing project where 72 people died: https://en.wikipedia.org/wiki/Grenfell_Tower_fire

	▲	11 minutes ago \| parent \| next [-]
		[deleted]
	▲	locknitpicker 2 hours ago \| parent \| prev [-]
		> like the fine example of Grenfell tower The Grenfell tower fire was caused by a renovation intended to improve thermal insulation. The renovation project used an external thermal insulation system that failed to meet both the manufacturer's recommendation and building regulation requirements. The particular system was actually banned in the UK while it was installed. Tell me why you believe this has anything to do with public housing.

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Spivak 3 hours ago | parent | prev [-]

Because government has a unique pricing advantage, they get additional value from the houses they build in the form of all the positive externalities and property tax revenue. So projects that wouldn't be profitable for private builders might still be worth it to the government. So it should be both.

They're just gonna pay builders a sum anyway so it's not like they need to shoulder the full upfront cost anyway.

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vasco 3 hours ago | parent [-]

Do you have example of another area the government has higher profit margins than private industry? I can't. And if I was going to think a government would build housing, it would be in places that are cheap and I could mass house a bunch of people, not in hip expensive cities which is what people want when they talk about this.

But surely soviet style huge blocks of tiny t0 apartments all stuck together is a dream...

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wongarsu 3 hours ago | parent | next [-]

> Do you have example of another area the government has higher profit margins than private industry?

Public transit. Capturing enough money from fares is difficult, maybe impossible, but it's quite profitable if you can capture the value generated by the enabled economic activity and raised property values.

The same really goes for most infrastructure. There's a reason the government operates nearly all the roads. Also the fire departments and police stations

	▲	raybb 3 hours ago \| parent \| next [-]
		Likely the same for public schools and maybe universities. Having educated folks in your city increases productivity and revenues and incomes.
	▲	vasco 3 hours ago \| parent \| prev [-]
		Yes and that reason is not because they are better at doing it profitably it's because they are commons that are wildly unprofitable to do well. If you let private industry build roads you'd have nice roads in cities and dirt in the rest of the country. In this case what people want is the reverse. They want the government to build in Austin. The government should be involved when market forces won't solve an issue, ie no market will make it profitable to send an ambulance to a town 3h away in the mountains. You don't need affordable housing in the center of Austin just because it's trendy though.

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neom 3 hours ago | parent | prev [-]

https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...

	▲	vasco 2 hours ago \| parent [-]
		This is a government literally putting their money in private companies instead of using it themselves (for idk schools or infrastructure for their people instead of giving it to nvidia and tesla). It's the most literal illustration of "private" beats "public" investment. Not sure what point you tried to make.