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.
Big builders have staff...and staff need work to get bonuses..the more paper shuffled..the more they keep their job.....would you want to be the Economist employee that would say we should quit building houses...he would be the first one fired....
production homebuilding is a low margin factory business without the factory. tremendous capital requirements mean high leverage; means high risk. ask anyone who was in the "oil patch" in the mid 80's. the competion is anyone from a pubicly traded company who cares a wit about profit and instead is after "market share", to the guy who has to unload his inventory because of his 3rd divorce. it is one tough business, i know because i did it for years. like any other business, it's what you don't anticipate that crushes profits.
cheers.