Those model homes are completely finished, and if you listen to the video as he's narrating it, he clearly states 'about a dozen other nearly completed homes' in the same subdivision. The ones shown being demolished are either completely done or very close to it, and are shingled.
This is what I call an extreme examples, just like the video of Perris, CA. These areas are armpits, and I say that with a cousin that lives next door in Apple Valley. If you are going to live in Victorville just move to Vegas taxes are cheaper. The landscape is the same. As I have said before I grew up in OC. Nobody but a freakin' idiot paid that much in Perris, Victorville, San Berdu, Riverside, Stockton. These are dump areas. Sorry but they just are. Even my cousin jokes that he owns a acre of sand! If the guy doing these videos wanted to a fair representation he would go to OC, San Diego, LA, San Jose, you get the point. He is finding statistical outliers. None of this tear down nonsense is going on in OC or any other decent area.
I'm somewhat familiar with certain areas of California in terms of the housing market, and can't argue with what you've said. I'm quite knowledgeable about the San Diego area, and in fact, have been looking for any 'deals' in that location (especially Pacific Beach or La Jolla), and even with something of a price adjustment on non-waterfront property (some water 'view' properties have adjusted down significantly but the same can not be said for anything that kisses the Ocean), I'm still not viewing it as optimal. However, regardless of the area, unless there's major safety, construction or health issues contained inside a new, complete or almost complete structure, tearing it down seems bizarre and foreign to me, whether it's Temecula or Stockton or Ventura, and I've never seen this going on before. As I said earlier, I've now heard (not confirmed) that banks taking new homes back are doing this is quite a few Western and Southwestern states, and also a few spots in Florida (Port St. Lucie area, though I suspect there is a big issue with developers who can't get Florida Power & Light to install electricity hookups to quite a few areas on properties they've already developed, some they've even sold contingent while times weren't so bad prior, and this may be the reason there). It's all very bizarre.
The "code" issues with these tear downs are not with the homes themselves but rather the incomplete infrastructure within the communities they're built. i.e. access roads, sewer, water etc. I did some quick reading and the figure of 100k per home for additional infrastructure was mentioned. Obviously these homes could never sell at replacement value so what's the sense in pouring good money after bad. Hence the bulldozers.
Well, if the developers didn't spend the money up front on proper excavation, road improvements, underground, utility hookups (water, N/G, sanitary sewer, etc.), they're the most incompetent home builders I've ever seen. I've never seen any builder, small or large, who built homes, on spec or contract, without being in a position to get an immediate certificate of occupancy so as to be able to close the sale as soon as the house is completed and passes inspections. This is even more true if the developer and builder and one in the same, as I suspect is the case here.
I think it's obvious this builder was purely on the come. I bet he didn't get more than one pre sale.....