The one thing that developers refuse to do is to migrate their business from a "bubble" business to a "long-term strategy" business.
That is, they have mastered the art of building cheap and cheaply-made, high-margin homes on small lots. The extra expense comes in by adding many additional angles to the design, both inside and outside. That is, non-right angle corners are far more expensive than right angles. typically, prices for these crackerboxes start at $350k.
However, they make a strategic error by just halting production during market slumps. They could take advantage of a weak market by combining lots and building well-made, expensive houses. Instead of building three houses to sell for $300k, build one house to sell for $1.2M.
By taking their time with each house, and throwing in lots of luxury finishing, they both use up the slack time of the slump, and still get healthy margins.
By "luxury finishing", I mean everything from above standard electrical, plumbing and sewage; to expensive inlaid tilework; to custom-built kitchens; elaborate swimming pools; complex landscaping; panic rooms; even basements, which are rare out West.
The idea is not to build "speculation homes", but to build unique houses, designed to last and be inherited, not sold.
Architectural style would also come into play again, with homes designed for particular purposes, like very high energy efficiency emphasizing solar power; high-security homes; groups of homes built in a cluster to create a greater sense of community with neighbors; child-oriented homes; homes that have a cultural architectural style; and high-tech homes.
While developers make some gestures to specialization like this, they steadfastly avoid expensive and time-consuming quality, and go for the cheap and cheerful, production model gimmicks and trendy items.
But the great secret is that when a housing bubble explodes, it does not effect all housing; just the housing that was part of the bubble. There are still plenty of buyers with plenty of money. And the best part is that building materials cost far less during a slump.
Builders are adapted to the business environment that the Federal Reserve forces upon them. If they didn't pay respect to the almighty Fed by cutting back on supply, they and the rest of the economy would get crushed.
Other than that, there is specialization among homebuilders, especially at the high end of the market. A builder with a reputation for low end homes wouldn't have a chance trying to break into the high end market on a temporary basis.