[ch4s3]

Right clearly, as supply meets demand and prices stabilize or start to drop, new supply will slow down. You can easily have scenarios where lots of supply is being built at once and outruns demand by a lot and causes a short term drop in prices, but that still won't cause supply to drop.

I think arguments like the one in the article have over-learned the lesson of 2008. Yes the financial crash in 2008 wiped out so many home builders that capacity to create supply was lowered. But that's not the sort of event that is caused by high supply.

[creer]

This discussion so far ignores cost. That's a problem.

And cost has to do with intensity of effort. In the case of construction, if there is less construction going on, then there is ("all other things being equal") more personnel available: so less delays and less hourly cost. If there is less construction going on, there is also less pressure on materials suppliers, so less expensive lumber, concrete, etc. So that it's easier to make a profit. So that it might make sense to build lower value housing. While when construction is booming, there is extra less incentive to build lower value housing.

Of course, if land availability is artificially constrained, then there is never much reason to build lower value housing. The profit is elsewhere.