> What do you think homebuilders do? Just close up shop when the market dips?
Uhh yes. Downward price pressure is a business-destroying event in real estate development. The amount of risk developers take on with each project is pretty incredible actually.
> Why would you build more cars as prices fall?
For one, there are advantages to scale. That is hardly true (and in many cases the opposite is true -- diseconomies of scale) in real estate development.
> The answer is there are companies in the business of building homes. If there is profit to be made,
No. The question is whether there is more profit to be made from building homes than from investing e.g. in the S&P500 or US 10yr Treasuries. Otherwise investors don't finance new home construction. We are already in an environment where real estate financing is simply not a great option compared to other ways to invest money, and so construction will slow as prices go down (which is, as stated, already happening in ATX).
