Wednesday, April 05, 2006

Second Homes Are 40 Percent Of Market

Link To This Post.

Hat tip to Southern California Real Estate Bubble Crash for pointing out this story in USA Today regarding the fact that 40 percent of the housing market is comprised of second-home buyers.

I wonder how many of them are flippers cheating on their income tax by claiming the purchase is a "second home?"

Here's an excerpt:
Americans snapping up second homes — as investments or vacation properties — accounted for four out of every 10 sales of existing homes last year, a record that helped drive the real estate market to new highs, according to a report being released today by the National Association of Realtors.

Nearly 28% of homes bought last year were for investment purposes, and an additional 12% were vacation homes, the figures show. Most of the buyers were baby boomers in their top earning years, looking toward retirement and hoping to build wealth or find a more desirable place to live.
Our favorite economist, David Lereah of the National Assoc. of Realtors, addresses how the tax code has changed to make this more doable:
Under the old system, the only way to avoid the tax was to "roll" the gains into another home of equal or greater value. Americans bought bigger and costlier homes. But now, they can downsize and use the equity built up in their homes to buy second homes.

"That's what spurred all this on in the beginning," says David Lereah, the NAR's chief economist. "It's like all the stars are aligned. The tax situations helped, but at the same time, baby boomers were entering their peak earning years. That's why we just boomed in second homes."
And, so, the next time you wonder why the NAR contributes so heavily to campaigns, you'll know why.

-- The Boy in the Big Housing Bubble/Los Angeles and Beyond