… why would the relative ranking matter?

Your claim is that falling prices aren’t leading to less development.

That is both logically and empirically false.

The observation is simply that supply chases demand. As demand is satisfied, prices go down and supply creation slows down or even stops. It’s befuddling that you’re acting like this doesn’t apply here.

> Vacant land that's desirable is often held back from development due to zoning or infrastructure issues.

Nah, it's mostly speculation. Zoning/infrastructure issues get baked into the price. If you cannot build anything on a plot of land, its price falls.

Even a small (~10 home) development, of which we need hundreds of thousands, will require millions in financing. And as the development gets smaller and requires less financing, the economics get a bit worse due to ~fixed cost of land acquisition, development, and infrastructure/utilities.

> Many companies often lose money, due to incompetence or bad luck

One of those signs of incompetence or bad luck is building a bunch of new supply into a market with falling prices, in which case you will find yourself not among those with healthy margins ;)

Then your point is meaningless. I (GP) was also pointing out the same equilibrium mechanic. The specific point I was making is that all evidence points to the equilibrium (in the US and elsewhere) being at a point that does not make housing easily attainable, and so becomes a political liability.

"Go build homes [beyond equilibrium]" is not a solution

Grocery stores don't require millions to billions of dollars of capital to execute each new transaction.

So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estate investment opportunities are often measured by their advantage (measured in fractions of a percentage, .2% advantage being considered solid) over 10 Year Treasuries or S&P 500 returns.

Real estate developers do often actually lose money, but the more salient boundary condition is whether they can get financing for a project, where they have to clear a bar well above the "just make >$0" bar.

> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.

Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down.

And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.