Some factoids:
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The Washington-based National Association of Realtors released a study that showed that nearly one in four U.S. homes bought in 2004 was purchased for investment purposes; 13 percent were bought as vacation homes.
House prices rose in 2004 at their fastest rate in 25 years, according to a government report released yesterday. The average price of a single-family home financed through secondary mortgage giants Fannie Mae or Freddie Mac rose 11.2 percent over the year, the strongest annual growth rate since 1979, according to the government's quarterly house price index.
Together, that constituted the surging second-home market, which accounted for 36 percent of the 7.7 million homes sold in the country last year. Second-home sales were up 16.3 percent over 2003.
The appreciation rate slowed dramatically, however, in the fourth quarter, to 1.7 percent, barely a third of the rate for the previous three months, according to the report.
"The second-home market is firing on all cylinders," said David Lereah, chief economist of the Washington-based Realtor group. "And it's middle Americans who are buying, not high-flying investors."
Lereah said baby boomers, the largest generation in American history, are in their peak earning years and they are the ones buying second homes in record numbers. He said American households increasingly saw real estate as an option to other investment vehicles. Historically low interest rates have also fueled the fire.
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So, that makes me seriously wonder what will happen as the baby boomer generation continues to age. We'll be left with the largest economic segment of our economy's population owning the majority of real estate with a small market to sell into. So an excess of supply could result.
If interest rates increase that could create a rush on selling as people try to check out early. This is a bad strategy in my eyes as if you own a second home as a rental property, or even vacation property, you can hold on to it and keep renting as an income source.
And at some point (based on my first hypothesis) baby boomers are going to have to cash out in order to realize the biggest potential for economic gain on their investments. Although maybe all these nice parents will just leave their houses to their kids.
So to me this looks like we'll have a house dump in about 10-20 years (or so)
I made that up on the fly, so I know it sucks, to all you out there who are way smarter please feel free to tell me my mistakes.
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The Washington-based National Association of Realtors released a study that showed that nearly one in four U.S. homes bought in 2004 was purchased for investment purposes; 13 percent were bought as vacation homes.
House prices rose in 2004 at their fastest rate in 25 years, according to a government report released yesterday. The average price of a single-family home financed through secondary mortgage giants Fannie Mae or Freddie Mac rose 11.2 percent over the year, the strongest annual growth rate since 1979, according to the government's quarterly house price index.
Together, that constituted the surging second-home market, which accounted for 36 percent of the 7.7 million homes sold in the country last year. Second-home sales were up 16.3 percent over 2003.
The appreciation rate slowed dramatically, however, in the fourth quarter, to 1.7 percent, barely a third of the rate for the previous three months, according to the report.
"The second-home market is firing on all cylinders," said David Lereah, chief economist of the Washington-based Realtor group. "And it's middle Americans who are buying, not high-flying investors."
Lereah said baby boomers, the largest generation in American history, are in their peak earning years and they are the ones buying second homes in record numbers. He said American households increasingly saw real estate as an option to other investment vehicles. Historically low interest rates have also fueled the fire.
###
So, that makes me seriously wonder what will happen as the baby boomer generation continues to age. We'll be left with the largest economic segment of our economy's population owning the majority of real estate with a small market to sell into. So an excess of supply could result.
If interest rates increase that could create a rush on selling as people try to check out early. This is a bad strategy in my eyes as if you own a second home as a rental property, or even vacation property, you can hold on to it and keep renting as an income source.
And at some point (based on my first hypothesis) baby boomers are going to have to cash out in order to realize the biggest potential for economic gain on their investments. Although maybe all these nice parents will just leave their houses to their kids.
So to me this looks like we'll have a house dump in about 10-20 years (or so)
I made that up on the fly, so I know it sucks, to all you out there who are way smarter please feel free to tell me my mistakes.