It's not unpredictability. They just get overextended.
In addition, the cost of the inputs also varies in high demand and low demand times.
Not really, prices for building materials usually stay the same and if they do change, there is plenty of time to take that into account.
There are very few, if any, situations where the builder can just take an extra hundred grand in profit.
It depends on whether is it a high market or low market demand area.
If what you say was true the profit rate would be much higher in construction than it actually is.
Oh it is in some places. Unless you have lived under a rock, you have heard of the insanely high cost for houses in some place like Calf.
The overextension is because the market cannot be that accurately estimated. Profits high one year new entrants rush in, overbuild, and profits crash until business failures adjust the rate of building. Then same cycle starts over again. This is similiar to the agricultural market cycle.
Lumber prices are not that stable and that is a huge part of total costs right there.
I do not agree that there is that much flexibility in pricing especially when you must recall that the vast majority of construction is financed. This means the clock is ticking and time is money. Thus, the builder wants to get rid of the house as soon as possible even before completion if he can. Hanging on to it too long can eat the entire profit if he is not careful.
Housing prices in California are not the result of excessive builder profit but rather new restrictions on them by the local communities, ecological demands from the environazis, etc. California builders do not make a higher rate of profit than builders in low price areas or you would see the market working to eliminate the excess.