Barron's Online
By HOWARD R. GOLD
1. Speculation's the problem, not housing demand.
Until this past year, the housing market nationwide was driven by "very tight supply and very strong demand," says Raphael Bostic, an expert on housing at the University of Southern California (see Fighting the Tape, "What's Really Behind the Housing Frenzy?2," March 25, 2004). And we saw only isolated instances where people bought and flipped homes the way they trade stocks.
Now, Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, estimates that 22% of all homes "are being bought for investment purposes rather than occupancy." That's more than twice the 9.9% the National Association of Home Builders estimates is "the investor share of prime conventional conforming mortgage loans to [homebuyers]" as of March. So, let's split the difference and say 15% of housing purchases are primarily for investment. That looks manageable for a while.