If you live in a magical fairy world where supply and demand are fixed, sure. In the real world, prices going down 10% leads to a surge in demand, and so you can fill more of your units. This leads to either equal or increased revenue, for the same construction (flat cost), which actually yields higher margins. This is why developers are usually concerned with occupancy rates, and prices are more a concern for homeowners.

There are only really 3 scenarios where prices are low and demand is low:

[1] There is a dramatic surplus of supply, in which case if a developer is trying to build they've not done research and probably should not get financing

[2] There is some other factor (usually high crime) in which case again, developer should do their research, and the market is operating fine

[3] You are developing super early and operating within incentives offered by the city, usually tax abatements, which drive down the carrying cost and make it a better investment.

Also important to note that in scenario [3] a smart developer will slowly release inventory to restrict supply to meet demand, and as demand grows, release more inventory at the newly raised price, continuing to do so as long as the tax abatements advantage the strategy. This is common in successfully developed areas e.g. Jersey City, and is fine as long as broad scale collusion doesn't occur

Can you define razor thin? Grocery stores have very small margins, as little as 1%.

Homebuilders make at least an order of magnitude more on a very expensive item.