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

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.