Getting Crushed in a Housing Collapse:
Carrying costs, esp if bought on low (or no) downpayment, with such arrangements as "interest only" loans, where there is no equity build up can crush "investors."
Even if you have 10% equity, a drop of 5% can hurt.
"...homes have carrying costs -- taxes, maintenance, and insurance -- that make it much harder for people to carry properties bought as an investment when the market turns south. In 2004, 36% of properties sold were second homes, the bulk of them purchased as investments. 'It's not like a stock,' where investors mainly have lost opportunity costs to holding a loser. With real estate, he notes, 'If prices don't continue to go up, you're 4% or 5% behind every year.' "
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