More than just playing real-estate chicken, I think there's an issue of inertia. Market research->Propose Project->Get Investors->Initial Design->City Approval. That's not just a major financial commitment. It's a huge _psychological_ commitment and no one is stepping back and saying "maybe we should reevaluate the market..look at all these other projects".

My guess is that a lot of developers still haven't come around to the idea that things aren't getting better anytime soon. Five years ago, the most bull-headed developers were the ones raking in the cash and that's still the mentality. Evolution hasn't weeded out the losers yet. They're telling themselves that "well, we saw we'd get that 15-20% ROI on this, and things have slowed down X amount, so we should still be OK" rather than looking at this with a modicum of common sense.

I know I wouldn't build here right now. I see a huge difference even in how my little $600/mo efficiency w/in walking distance of downtown is renting out. Last year, it went in 2 days. We had at least 10 people call. They were about 40/60 students to working people. This year, same apartment, it's been listed for 1.5 months, for $550 rather than $600, and we've had 7 or 8 calls in all that time. All of them students. Seems like non-students are finding ample cheap housing now, while they weren't a year ago. That's giving the students a lot more to choose from. Or maybe I need a bigger sample size.