The USA Today reports that speculative home buying is through the roof. "Americans snapping up second homes, as investments or vacation properties, accounted for four out of every 10 sales of existing homes last year, a record that helped drive the real estate market to new highs, according to a report being released today by the National Association of Realtors."

"Nearly 28% of homes bought last year were for investment purposes, and an additional 12% were vacation homes, the figures show. 'Real estate has outperformed virtually every other investment vehicle,' said (broker) Ron Peltier. A lot of people have just speculated in real estate.'"

"Sales of vacation homes rose 16.9% to a record 1.02 million, while sales of homes owned for investment purposes increased by 15.7% to a record 2.32 million, the real estate industry group said."

"The trend really started after 1997, when Congress changed the tax code, allowing most homeowners to duck capital gains taxes when they sold their homes. Under the old system, the only way to avoid the tax was to 'roll' the gains into another home of equal or greater value. Americans bought bigger and costlier homes. But now, they can downsize and use the equity built up in their homes to buy second homes."

"'That's what spurred all this on in the beginning,' says David Lereah, the NAR's chief economist. 'It's like all the stars are aligned.'"

"He thinks the trend crested in 2005. With rising interest rates, tighter lending standards and slower price appreciation, Lereah expects second-home sales to drop this year to 30% of all existing-home sales, and maybe into the 20% range. 'What's going to be leaving the market right now are the speculative investors who came into the market and were trying to flip homes,' he said. 'They were buying one, two, three or four properties at a time, and that was distorting the numbers.'"

"More than three-fourths of the buyers had no interest in renting their property. About 20% said it would one day be their retirement home."

"Joe Klein and his wife bought their first vacation home last year on Lake Wabedo in Minnesota, three hours from their primary residence. He says he might like to retire there but might have to persuade his wife. 'It's something that we could hand down to the kids,' says Klein. 'But secondly, I see it as an investment.'"