re: What keeps homebuilding from being profitable and more prolific?

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There's never been a recovery from the decimation of builders during the great recession likely because so many dropped out of the business and never came back.

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The "there is no housing shortage" folks ignore the overall age and condition of the vast majority of homes that might be considered "starters", too. Our housing inventory is aging rapidly. There was a building boom from the mid-80s through the Great Recession, but that was about it. There are relatively fewer builders and developers working up 200 to 300 unit subdivisions with spec houses. Everyone wants to do custom or semi-custom in much smaller developments for the upper middle class.

Anecdotal but there's a ton of new housing being developed around Charlotte, just not SFH. Developers maximize their profits jamming cheap triplexes on these small lots in any area they deem remotely "desirable". Very rarely, these days, will you see a new SFH being built unless zoning won't allow MF or the proposal gets NIMBY'd. While it is housing but I do not imagine most people want to raise a family in a triplex and you also get hit with HOA.

5-12% margin on what money? Most houses are built with loans. I am a real estate investor. I can have a house built and sold with very little of my own money as long as I look good to banks. My profit per house exceeds my out of pocket. I just have to stay strong enough financially to have enough money until the house sells.

Does anyone know someone that lives on the street because they can't afford a house yet they have the rest of their life together and are a college graduate with a good job? The answer is no.

There's no home supply issue, there's a home supply complaint issue. As said, there's a supply issue where demand is high which in turn you know, jacks up prices.

Vacation homes and STR's have affected that, absolutely. But that's called capitalism and if they are being purchased for more than someone is benefiting them and if they are renting for more than someone is benefiting. So why the hell are we complaining about those? Yes, lets have someone else pay less taxes and make less money because...because we should be communist? GTFO.

Housing is also arguably in a large bubble and prices are going down. I'm not so sure in 3 years homes are quite a bit lower still by 10-20% from todays prices.

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5-12% margin on what money?

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Homebuilder equity?

It's a very thin-margin business. Like I said, the big value swings happen with land, not structures.

In NY and CA, government bureaucracy is a big part of the problem.

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Most people in this country can't afford to miss one paycheck, let alone save up enough cash to afford a house.

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You and I know a completely different set of “most people”

Right now, I believe the issue is likely Access To Capital ….. and the cost of that capital if you can get it.

The banks have severely tightened lending standards for builders , both large and small. I was a licensed builder during the late 70’s /80s in the Florida panhandle, building custom and spec homes in the residential market, as well as a half-owner of a specialty commercial contractor (convenience stores) . I mention this because the situation then reminds of what is happing in the current economic cycle.

The large, corporate builders have access, but maybe not the level they once had. The smaller builders have a big challenges right now. Significant challenges ….. like financial costs, material shortages, cost increases, crew availability, theft, etc, etc.

If you’re in this group of builders, you need an edge … beyond just sweat equity. Profit margins back then were about 7-8% on spec homes, 15% on custom homes if you used subcontractors for the key stages (site prep, concrete, framing, dry-in.)

But with spec homes, TIME is the critical measure, IMO. Any delays at all will eat into profits quickly due to the higher rates on borrowing. In 1982 we were paying 15.75% on construction loans , max term 1 year) Meaning, I had to have located a buyer before completion or it would quickly be a loser. The increased risk is enormous.

IMO, the smart builders are also licensed RE agents, and have the ability to develop small projects ( e.g. < 12 homes) In this way, they get a cut for both functions, effectively leveraging thier profit margins up to the 20%+ range .

The commercial acquisitions by Blackrock, Vanguard, et al ….. is mostly in the large metro areas. Has anyone noticed them doing this in rural areas? I haven’t, they might bu I haven’t seen it.