CNBC had an item on housing a few days ago and they indicated that 23% of the housing sold in 2004 was for investment ( second home or rental ) and was not intended as a residence for the buyer.
I don't know what % is typical over the years but 23% sounds too high for a healthy market. "The Economist" had an article last week with information about some markets experiencing a decline in housing prices.
I don't have the answer either. But, I have owned quality rental property for 30 years and one thing is for sure... The return is as bad as I have ever seen it. More people are "qualified" for credit and with the low interest rates more people are buying rather than renting. People are getting loans for more than the value of the property... It's crazy! Rental rates are actually declining at the same time that housing prices are going up!
Who knows what happens next but for sure if rates go up too fast you will see a glut of housing on the market with no buyers. New housing won't be sold and default rates will go up on existing loans. Higher rates could result in business slow down, increasing unemployment rates and higher defaults.
Some markets actually have people buying houses with no intent of them being occupied, knowing that they can be sold for a higher price later. This market has a lot of bubble like features.
Dick Milde
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