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Homeowners in Harm's Way

First, he said, a survey conducted by the NAR a month ago indicated that 36 percent of all recent home buying involved second homes. "That raised eyebrows" because the figure was so high, he said.

It suggested that "there is certain segment of real estate investors getting more involved in speculative buying," speculative in the sense that "they are basing their investment on what may be an unreasonable expectation of future prices so that when you look at cash flow it's negative," perhaps even with an ARM at present low rates, "so they are completely depending on the price increase" for a profit.

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But while this group has been getting headlines, it remains small relative to the overall market, Lereah said.

Second, many second-home buyers are paying prices in line with the past, he said, adding that many of these buyers, having seen their equity soar in their first homes, have been able to cash in some of that through refinancing and buy their second homes for cash or with big down payments.

Finally, Lereah said, while house prices have been rising faster than income, the ratio of debt payments to income remains relatively low -- 19 percent of income compared with 30 percent at times during the 1980s -- indicating that most homeowners have a considerable cushion to fall back on.

Families who have an ARM, and who plan to remain in their house for a long time, should think about refinancing it if they can. Rates remain fairly low even after a couple of bumps, and once you have locked in a loan whose payments you can afford, you will in an odd way have put inflation on your side. Your loan payment doesn't change -- at least not the principal and interest part -- and as your income rises with the passing years, the payment shrinks relative to your paycheck.

In addition, if interest rates rise and house prices slip, your tax assessment will stop going up. Then you can hunker down, go about your business and wait for the next housing boom.

A couple age 65 and retiring now without employer-provided health insurance would need $190,000 just to pay the medical expenses they could expect to incur during the remainder of their lives, according to a study by Fidelity Investments. That's up 8.6 percent from the $175,000 that Fidelity estimated last year.

Prescription drugs would account for a third of the cost, Medicare Part B and D premiums a bit less than a third, and co-pays, deductibles and other out-of-pocket items would take the rest, Fidelity said.

Want to tell the Internal Revenue Service what you think?

Now's your chance. The tax agency is looking for volunteers for its Tax Advocacy Panel, a forum for citizens from each state to make suggestions regarding how the IRS should do its job.

To qualify as a TAP member, applicants must be U.S. citizens and be able to commit 300 to 500 hours during the year to the panel. Oh, and they must be current with their tax obligations and pass a criminal background check. Applications are available at www.improveirs.org. The deadline is April 29.


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