[LegitShady]

Housing developers have low margins overall, huge up front costs (and high interest rates these days), massive regulatory burden, and decent amount of risk.

Becoming a housing developer is a lot easier said than done. Do you have the startup capital to build one house? Five houses? How about startup capital to purchase a new development, go through regulatory approval, a year of utility moves, heavy equipment for a year of subgrade preparation and site sloping for drainage and elevation as well as installation of basic utilities like sewer/water/electricity/networking, and then actually building and finishing houses? Not 5 but dozens?

That's a game for people who are already super rich not a game for people who want to get rich. If you want to get rich stick to flipping and renovating.

[SkyPuncher]

This is what banks are for. Real estate is essentially their bread and butter. It’s a physical, valuable asset that they can seize and auction off.

We’re also talking about houses (stand-alone units) rather than housing. These developers aren’t fronting the cost to build individual homes. That’s all covered by home owners (via a construction loan)

[lotsoweiners]

Not true when we are talking about tract houses in brand new neighborhoods. They have to have the land, build model homes, hire staff to show the homes and process paperwork.

A couple years ago I went and looked at houses in a new development that no one was living in yet. They had at least 5-10 + houses that were already framed but were looking for a buyer.

[javagram]

Construction loans are for custom builds where the homeowner is contracting directly with a builder, with no developer middleman, I thought?

Someone I knew recently “built” a home through a developer and they didn’t need to get a loan until a couple months before closing on the finished, move-in ready home.

[SkyPuncher]

It goes both ways. In that case, the developer had the cash to front the loan.

[LegitShady]

when there are high interest rates, the large loans that are required to front the money to develop the land and build homes costs the developer more, and thus raises t he cost of housing, and also the risk to developers.