Why Are Vacation Home Prices Down?

Some time back I reported that statistics show sales of vacation homes for personal use were robust last year. But nationally prices did dip. The median price of a vacation home in 2006 was $200,000, down 2 percent from $204,100 in 2005.

"For vacation home prices to edge down in a record market is a bit puzzling,” David Lereah, chief economist for the National Association of Realtors, said.

My thunderclap of insight: perhaps the prices went down because there were so many vacation homes for sale, it became a buyers' market, and smart buyers negotiated lower prices. Also, perhaps the vacation home buying spree was weakest in expensive Northeast markets, which accounted for 25 % of sales, while remaining strong in South and West.