Interest Rate Roundup

Wednesday, April 05, 2006

NAR: Rampant housing speculation

Stunning new stats just came out on the 2005 housing market, courtesy of the National Association of Realtors. The NAR's findings -- 40% of ALL home purchases last year were for investment (27.7%) or were vacation home buys (12.2%). The combined second home share is up from 36% a year earlier and the highest ever.

Why is this so troubling? "Primary" homeowners, or those who own a single home purchased purely as a place to live, are the most stable kind of owner. They will do everything possible to stay in their homes despite rising rates, ballooning for-sale inventories, etc. BUT when you have 4 out of 10 buyers purchasing for fun (vacation homes) or profit (investment), you have a very unstable base.

They’re not going to sit there and watch the market head south. They’re going to run for the hills -- eventually listing their properties at fire-sale prices. Chalk it up as yet another reason to worry about the long-term housing market trend.


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