by Calculated Risk on 2/05/2007 11:13:00 AM

"We are concerned that there could be downward pressure on [housing] prices for awhile."
J.P. Morgan economist Haseeb Ahmed, Feb 5, 2007

From the WSJ: Vacant Homes For Sale Cloud Economic Hopes

... the overhang of vacant housing stock could erode existing home values as sellers slash prices to move their vacant properties. Economists fear that many vacant homes are owned by speculators who are stuck with investment properties that they can't sell and may be under increasing pressure to drop their prices. "We are concerned that there could be downward pressure on prices for awhile," Mr. Ahmed says.

Such worries could cloud hopes for a swift housing rebound. ...

The homeowner vacancy-rate increase "does temper your outlook" for new construction, says David Seiders, chief economist at the National Association of Home Builders in Washington. Mr. Seiders is forecasting largely flat housing sales this year followed by a strong rebound in housing starts in 2008. "There clearly are uncertainties about how this is going to work its way out," says Mr. Seiders. "I keep preaching to builders it's not time to ramp up production."
...
The recent vacancy data may be a useful measure of speculative activity and its fallout.

"I think a persuasive case can be made that the reason we are seeing such extraordinarily excessive vacancy is because of the heavy investor demand over the past few years," said Richard DeKaser, chief economist at National City Corp.

What's troubling is that speculators may not act like typical home sellers. When they sell their vacant home in a down market, they don't necessarily purchase another home. By contrast, people selling the homes they live in will most often buy another house -- thus fueling a healthy market of buying and selling.
...
"This whole thing has been new," says Mr. Seiders, the National Association of Home Builders' economist. "We've never seen this kind of investor activity and we've never seen this kind of [vacancy] resale. It's an extra complication moving forward."