It only dawned on me this week how significant it is that some 40% of the housing purchased in the last 24 months was purchased as investments and 2nd homes.
That’s a lot of houses / condos being purchased by people who have no intention of living in them as their primary residence.
Many of these housing units are currently sitting vacant. This is important because some real estate analysts assume that when a housing unit is sold, the seller will HAVE to either buy or rent another unit.
What happens to these houses / condos when the market softens?
I believe most of them (maybe 70% ?)will end up on the market for sale. A lot of these sales are likely to be motivated by fear and desperation.
The housing units that don’t sell will go back to the bank or become rentals.
Banks don’t like to own residential real estate so they will be dumping housing onto the market at motivated prices. These units are likely to be purchased by investors for resale or rental.
It will take some time (12-24 months?), but I believe the local rental market will have a glut of new units being offered. Rents should drop as landlords compete to attract tenants.
But the really significant point that I hadn’t realized until this week is this: if 40% of the housing purchased in the last 2 years was purchased by investors/2nd-home-buyers, when those people STOP buying, 40% of the DEMAND FOR HOUSING GOES AWAY.
That means the motivated sales of housing units is occurring in a market where demand has dropped by 40%!
