> When prices actually go down, builders get nervous, lenders get cautious, financing dries up, and projects disappear.
No, it depends on the causes that drove the prices down. Some of those will get builders nervous, while others will make them giddy.
> New construction has collapsed not because of a lack of land, permits, or even demand but because the financial risk has become unmanageable. High interest rates, shrinking margins, labor shortages, volatile materials costs… none of these are softened by falling home prices.
They are: if you can build a house in 1 day instead of 1 year waiting for some permit, your costs of capital goes down, so it can offset some of the other costs going up. If your permit doesn't force you to limit the size/number of units, you can spread your fixed costs over more units, raising your margins, which directly softens ... shrinking margins