[nine_k]

Doesn't the price of land play a role? If the developer pays $100k for a parcel of land and builds a $500k house on it, they may have their margin on the $400k, but if they build a $250k house, it's only $150k, a more dramatic drop.

The minimum lot size requirements don't help the situation either.

It likely would be more efficient and profitable to build a townhouse, or even a mid-rise, and let more people live on the same parcel of land, but zoning restrictions often prevent that.

[ncruces]

Not just land, but all the bureaucratic costs, licensing, etc. Developers will always build the most high margin house the market will bear.

It still increases supply, though. And if there's no market for expensive houses, eventually they'll make cheaper houses.

Also, the people on the market who can afford the expensive houses, would still outbid you for a shittier house.