Do you own a second home or investment property in a vacation spot?  Don't expect to be able to sell it any time soon.  Vacation markets all around the country are seeing prices drop as the real estate bubble deflates.

David Olsen of Wholesale Access (whose clients look like a who's who of mortgage lenders), reports that 40% of all homes being bought are being purchased by either investors or as vacation homes.  That's who is artificially driving up the prices we are seeing in the market. 

Olsen reports that in 2005, 28% of homes were purchased by investors and 12% were bought as vacation homes.  Vacation home prices shot up in the past five years and are now deflating.  One example Olsen gives is near Sarasota, Florida, where homes bought for $140K five years ago, sold for between $700K and $800K last year.  This year buyers are accepting $500K just to get out before the bubble burst.

Scenarios like this one are happening all over the country in vacation spots.  Mark Zandi of economy.com predicts that the first to be hard hit will be California, Florida and the DC market. 

If you're thinking of buying a vacation home now, don't.  If you have one and can get out with a decent profit, it's probably a good time to do it.