Don't speculate: Could the end of spec housing be skewing the market lower?

Before you go, we thought you'd like these...
Before you go close icon
I was talking to a real estate agent today about how reported home value declines have been exacerbated by distressed sales -- often of properties that have been neglected by cash-strapped home owners with no incentive to maintain properties that they have no hope of holding on to.

Ever the salesperson, she pointed out another factor that may be skewing homes sales data lower: the decline in sales of speculative housing.

During the bubble, home builders put up luxury homes completely on spec -- and then listed them with real estate agents in the hope of finding a buyer and making a quick, huge profit. Now, "building on spec" is a thing of the past, and any new luxury homes are constructed for specific buyers on land plots that have already been sold.

See the problem? The high-end spec properties showed up in the MLS data. The high-end custom-built homes don't show up in the data because they were never sold upon completion. In other words, a big chunk of the highest end homes no longer appear on the market.

How much of an effect is this having? It depends on the region. In areas where new construction has ground to a halt, the effect is very minor. But if you're in a town where spec housing has been replaced by custom-built mansions of land already owned by the purchaser, it may be dragging down the mean and median home values in your area.
Read Full Story


S&P 500 2,358.57 16.98 0.73%
DJIA 20,701.50 150.52 0.73%
NASDAQ 5,875.14 34.77 0.60%
DAX 12,226.93 77.51 0.64%
NIKKEI 225 19,217.48 14.61 0.08%
HANG SENG 24,359.43 13.56 0.06%
USD (per EUR) 1.08 0.00 -0.27%
USD (per CHF) 0.99 0.00 0.13%
JPY (per USD) 111.14 -0.09 -0.08%
GBP (per USD) 1.24 0.00 -0.04%

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners