Comment by bombcar

You have to completely satiate the demand for luxury housing before it becomes "desirable" to build new standard housing. In years past the "starter home" market has completely been reselling past housing, even what was lux at the time of building.

Why would you spend your time and effort building a house that earns you $50k when for the same time and effort you could build a house that earns you $150k?

You'd only do the first if the second wasn't available.