How is this different from any other manufacturing? Coca-Cola produces soft drinks in anticipation that consumers will purchase the product. Automobile manufacturers produce large numbers of cars and trucks in anticipation that consumers will purchase their vehicles. Likewise, the housing industry builds houses they have reason to believe will be purchased.
If any industry produces more than the market will bear, the price of their inventory will drop. In some cases, the manufacturer will be unable to sell even at a loss, and will have to eat their inventory.
However, if we allow government to regulate supply, we end up with wild oscillations of the market. This is currently happening in the housing market, the energy market and in the food market (because of ethanol legislation). The ego maniacal fascists (in the true sense of the word) think they know better than the market forces, and they invariably destroy the market.
Many communities have some limits on development. I don’t think that is necessarily a problem, if it is done on the local level. Don’t you think that municipalities should limit the number of building licenses they allow per year? As far as over-producing in the soft drink and automobile industries, I think that they try not to over produce because they would be stuck with the loss. Big developers on the other hand seem to build very quickly and then move on to their next project. They get there money up front and then they move on.