Vacation-Home Sales Up; Investment Purchases See Sharp Decline

Second home buyers are coming back into the market, but apparently they preferrnrelaxation over investment.  The NationalrnAssociation of Realtors® is reporting the vacation-home sales increased evenrnmore than the sale of primary residences in 2009 with the former up 7.9 percentrnwhile the later rose 7.1 percent.  Duringrnthe same period the sale of investment properties fell 15.9 percent.   

NAR's 2010 Investment and Vacation Home Buyers Survey shows a total ofrn553,000 sales of vacation homes in 2009 compared to 513,000 in 2008.  However, the sales of investment homesrnplummeted from 1.12 million to 940,000. rnThe sales of primary homes were up to 4.04 million from 3.77 million inrn2008.

According to NAR Chief Economist Lawrence Yun, “The typical vacation-home buyerrnis making a lifestyle choice, with nine out of 10 saying they intend to use thernproperty for vacations or as a family retreat. rnInvestment buyers primarily seek rental income, with six in 10 planningrnto rent to others, although one in five wants a family member, friend orrnrelative to use the home.”

There is some conflation of the numbers as some purchases are intended forrnmultiple uses.  Most vacation home buyersrnintend that their purchase be for personal use with only one out of four planningrnto rent out the home.  One in fiverninvestment property purchases will be used for vacations or as a familyrnget-away.  Many buyers are purchasing forrnthe future with 26 percent of vacation home buyers and 8 percent of investmentrnbuyers intending to eventually use the house as a primary residence.

The median price for a vacation home in 2009 was $169,000, substantiallyrnhigher than the median of $150,000 recorded a year earlier.  NAR speculates that this might have been thernresult of increased sales in higher priced areas in Florida and Californiarnrather than any national increase in prices. rnIronically it could actually indicate that prices in some more expensivernareas had become more attractive over the year because of price decreases.

Investment homes constituted 17 percent of all home sales in 2009 comparedrnto 21 percent in 2008.  Vacation-homernpurchases went from 9 to 10 percent of the market.

Investment properties sold at a median price of $105,000 last year comparedrnto 108,000 in 2008.  The West was thernmost active region for investment home purchases and there were reports of arnhigh share of purchases in California that were all-cash, especially in thernlower price categories.  Cash salesrncontinue to be a strong factor in both vacation and investment home purchasesrnnationally as well.  Three of tenrnvacation-home buyers paid cash last year as did half of investment-home buyers.

Three out of four second-home buyers were married couples. The typicalrnvacation-home buyer in 2009 was 46 years old, had a median household income ofrn$87,500, and purchased a property that was a median distance of 348 miles fromrntheir primary residence. Investment-home buyers had a median age of 45, earnedrn$87,200, and bought a home that was relatively close to their primary residencern- a median distance of 24 miles. Roughly one in four investment buyersrnpurchased more than one property in 2009.

Yun said that prospects for continued sales of second homes are favorablernbecause the nation's demographic profile shows a large number of people who arernin the right age bracket for such purchases. “The large number of people whornare now in their 30s and 40s will dominate the second-home market in the comingrndecade with a strong underlying demand, although sales in a given year willrnvary depending on the economy. Mortgage lending for second homes wasrnextraordinarily tight in 2009 but it is likely to ease a bit in 2010.”

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