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estearum | on: Austin’s surge of new housing construction drove down rents
> 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.

gnopgnip | parent | next
Dr Horton is the largest builder in the US. In q3 2025 they had a 21.8% gross margin.
eks391 | root | 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 | root | parent
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.

epistasis | parent
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.

estearum | root | 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 | root | 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.