The National Association of Realtors (NAR) reports that vacation home sales are picking up again and experts say that’s a good sign that the market really is in a state of recovery. Holiday home sales are typically the first thing to fall off when things are bad because most buyers view them as a luxury, so when the market for these homes turns a corner it can mean good things for the rest of the real estate market. NAR analysts say that many people are motivated by reasonable prices, even though they’re now on the rise. For more on this continue reading the following article from TheStreet.
The vacation-home market, like the rest of residential real estate, rises and falls with the economy, interest rates and employment levels. But in one respect it’s very different: People don’t need vacation homes like they need primary homes, so when conditions get bad vacation homes are often the first part of the housing market to suffer.
And when the vacation-home market starts to perk up, it suggests housing really is on a comeback, because people don’t buy beach, mountain or lake places unless they feel pretty confident
Well, vacation home sales are picking up. A survey by the National Association of Realtors found that sales rose 10.1% last year, compared with a 2.1% decline in investment-home sales and a 17.4% increase in sales of primary homes. (Vacation homes are bought primarily for the owner’s use, while investment homes are used mainly as rentals.) For the year there were 553,000 vacation-home sales, 1.21 million investment-home sales and 3.27 million sales of primary residences.
The median price for vacation homes was $150,000, up from $121,300 in 2011, mainly due to increased sales of more expensive properties, the NAR said.
"We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes," NAR Chief Economist Lawrence Yun said. "Attractively priced recreational property is also a big draw."
A partner in the survey, HomeAway (AWAY), operator of online rental sites such as Vacation Rentals By Owner, noted that 38% of vacation homebuyers said they were motivated primarily by low prices. Another 28% cited the desire for a family retreat.
"Although vacation homes’ prices are starting to rise, the cost is still incredibly affordable compared with prices 10 years ago," HomeAway CEO Brian Sharples said.
The NAR said 46% of vacation-home buyers paid all cash and that large down payments were typical for those who borrowed.
"The typical vacation-home buyer," the NAR said, "was 47 years old, had a median household income of $92,100 and purchased a property that was a median distance of 435 miles from their primary residence; 34% of vacation homes were within 100 miles and 46%were more than 500 miles. Buyers plan to own their recreational property for a median of 10 years."
Potential buyers should take to heart that last fact — the median 10-year holding period. Because the market for vacation homes can be volatile, it’s risky to buy a home you may have to sell quickly.
Other factors to consider: Will the family really want to vacation in the same place year after year? If the parents or grandparents buy, what will happen to the property after they pass away? If the home will be used by an extended family, how will scheduling conflicts be resolved?
And most important: Can you afford to maintain the property even after a setback such as a job loss or a shortage of renters?
If all the answers to these questions make a vacation home look like a sensible purchase, now is a good time to start looking. Prices are still well below their peaks of the past decade, and mortgage rates are still incredibly low.
This article was republished with permission from TheStreet.