Yes, I read the article. The bank is telling them "you are stupidly overpaying, our risk is based on the resale value of the collateral, and we think the collat

Yes, I read the article. The bank is telling them "you are stupidly overpaying, our risk is based on the resale value of the collateral, and we think the collateral is only worth $X, so we are not going to loan you more than 80% of $X." Putting this magic voodoo phrase "less than they can be built for" in italics does not make it any more meaningful. Some other things that can't be made for less than they are worth: manual typewriters, augmented reality glasses, 50 foot butter sculptures of Mickey Mouse. It happens that right now in our current housing market, there is a surplus of existing homes which means it is not economical to built houses. Now, it seems unlikely that this is a permanent state of affairs (since houses, unlike manual typewriters, are still in pretty high demand).