Mon, 14 May 07
March US home sales ‘are likely to remain soft, with some drag possible in May as well’, the National Association of Realtors has reported...
Sale contracts signed but not completed in March hit a low last seen in 2003.
‘Although the weather improved in March, we’re starting to see the effects of a decline in subprime lending and tighter lending standards, said NAR chief economist David Lereah. ‘Home sales will be relatively sluggish in the second quarter, but a modest uptrend should resume during the second half of this year’.
However, a Reuters/University of Michigan survey of consumers confidence showed Americans were not so confident in fact consumer confidence was down for the third month in a row in April and at a seven month low.
Consumers were worried about the housing market, they said. Although most did not expect prices to crash, they did not expect them to rise by any significant amount either although they did expect moderate increases over the next five years.
Holiday home sales ‘rising’
Against this background it was not surprising that NAR’s annual review of the second home and investment home market showed sales of investment homes to be down by 28.9 per cent last year (sales of primary residences were down by 4.1 per cent on the previous year).
However, sales of holiday homes rose by 4.7 per cent.
Together investment and holiday homes sales accounted for 36 per cent of all existing and new residential transactions with 22 per cent of all homes purchased last year being bought for investment (down from a 28 per cent in 2005), and 14 per cent being bought as holiday homes (up from a 12 per cent in 2005).
‘We expected the drop in investment sales because speculators left the market in 2006, which caused investment sales to fall much faster than the primary market’, said Lereah.
‘But the rise in vacation-home sales is based on strong demographic and lifestyle factors, with only modest interest in renting their properties to others’.
The median price of a vacation home in 2006 was £100,360, down 2.0 per cent from £102,400 in 2005. The typical investment property cost £75,300 last year, down 18.3 per cent on 2005.
Mr Lereah added:
‘The drop in investment prices comes as no surprise, but for vacation-home prices to edge down in a record market is a bit puzzling. It may result from a large dumping of inventory on the market by speculators, especially in the condo sector, with long-term, second-home buyers taking advantage of the glut and buying at negotiated discounts. This underscores that housing should always be viewed as a long-term investment, providing solid returns over time’.
He continued: ’Second homes are really ‘something of a misnomer ‘A fair number of respondents buy multiple properties. Eighty six per cent of vacation buyers purchased one vacation home, 12 per cent purchased two homes and 2 per cent purchased three or more vacation properties.
He concluded: ‘Sixty-three percent of investment buyers purchased one investment property, 23 per cent bought two properties, 9 per cent bought three investment homes, 2 per cent purchased four properties and 2 per cent bought five or more investment homes’.
Back to: News Index