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With 50 year financing, Pulte could shift more people into 5,000sqft McMansions, instead of 3,500sqft McMansions, and take more money off them.
Nice try, but you didn't do the MATH.
Total Profit = Profit PER UNIT x Number of units SOLD.
The Profit PER UNIT goes UP 30%--but the Number of units SOLD goes down by 50% to 75%.
Remember, this is for the *total industry*, not just for one builder. Pulte may not survive.
100% profit TODAY goes to 130%, BUT the number of units *sold* FALLS from 100% to 25%-50%.
So, NEW Total Profit = 130 x 25% = 32.5 compared to OLD Total Profit (100% x 100) = 100 (25% total number of NEW buyers due affordability AND lack of space to build new houses).
Increasing the NEW Total Profit can't work when the price is beyond the affordability of the *far fewer* number of buyers who can get the financing for the FAR more expensive houses. Most people who would LIKE their own house can NOT afford it due to HIGH PRICES.
Still LONGER financing terms? Same problem, only the number of builders goes DOWN FAST while the ELIGIBLE number of buyers falls even further.
