3 ms·

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

mrcode007 7mo ago
This 1000x. Folks don’t get that the primary market != secondary market. Same as pre-IPO stock holder != IPO time buyer.
estearum 7mo ago
And... how is this relevant? I'm not sure what you're trying to imply here. You should spell it out explicitly.
- epistasis 7mo ago
  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.
  - estearum 7mo ago
    > 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.
    - epistasis 7mo ago
      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 7mo ago
        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 7mo ago
        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.
    - gnopgnip 7mo ago
      Dr Horton is the largest builder in the US. In q3 2025 they had a 21.8% gross margin.
      - eks391 7mo ago
        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.
        vel0city 7mo ago
        > Is Dr Horton building homes in Austin? Yes, a ton. https://www.drhorton.com/texas/austin https://www.drhorton.com/texas/austin > That could explain high profit while dissuading new construction in Austin. Given they're still building a ton in Austin, there doesn't seem to be a dissuasion for building there. I do not have any idea about their average margin in the Austin market versus other markets though, but if that was a major decider on whether to build or not the answer is they're still choosing to build.
        estearum 7mo ago
        You can look at new housing starts to see there is indeed a dissuasion to building there. That's literally the very first observation in this thread: construction rates are already falling significantly.
        vel0city 7mo ago
        Dropping a bit from being one of the highest rates in the country still puts it at one of the highest rates in the country. Looking at this data: https://constructioncoverage.com/research/cities-investing-most-in-new-housing#results https://constructioncoverage.com/research/cities-investing-m... If housing starts in Austin drop 15% for 2026, as some places are estimating, that puts Austin from 32,294 to 27,453 new homes added. It changes its national rank in this dataset from #6 to...#6.
  - pandaman 7mo ago
    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.
nsnzjznzbx 7mo ago
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).
- vasco 7mo ago
  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"?
  - Spivak 7mo ago
    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.
    - vasco 7mo ago
      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...
      - hnaccount_rng 7mo ago
        Isn't the US example: Medicare/Medicaid? It has far less costs (i.e. more of the money spend ends up with patient care) and has a reasonably good reputation?

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

estearum 7mo ago

And... how is this relevant? I'm not sure what you're trying to imply here. You should spell it out explicitly.

epistasis 7mo ago
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.
- estearum 7mo ago
  > 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.
  - epistasis 7mo ago
    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 7mo ago
      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 7mo ago
        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.
  - gnopgnip 7mo ago
    Dr Horton is the largest builder in the US. In q3 2025 they had a 21.8% gross margin.
    - eks391 7mo ago
      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.
      - vel0city 7mo ago
        > Is Dr Horton building homes in Austin? Yes, a ton. https://www.drhorton.com/texas/austin https://www.drhorton.com/texas/austin > That could explain high profit while dissuading new construction in Austin. Given they're still building a ton in Austin, there doesn't seem to be a dissuasion for building there. I do not have any idea about their average margin in the Austin market versus other markets though, but if that was a major decider on whether to build or not the answer is they're still choosing to build.
        estearum 7mo ago
        You can look at new housing starts to see there is indeed a dissuasion to building there. That's literally the very first observation in this thread: construction rates are already falling significantly.
        vel0city 7mo ago
        Dropping a bit from being one of the highest rates in the country still puts it at one of the highest rates in the country. Looking at this data: https://constructioncoverage.com/research/cities-investing-most-in-new-housing#results https://constructioncoverage.com/research/cities-investing-m... If housing starts in Austin drop 15% for 2026, as some places are estimating, that puts Austin from 32,294 to 27,453 new homes added. It changes its national rank in this dataset from #6 to...#6.
- pandaman 7mo ago
  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.

nsnzjznzbx 7mo ago

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).

vasco 7mo ago
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"?
- Spivak 7mo ago
  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.
  - vasco 7mo ago
    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...
    - hnaccount_rng 7mo ago
      Isn't the US example: Medicare/Medicaid? It has far less costs (i.e. more of the money spend ends up with patient care) and has a reasonably good reputation?