Vacation home sales in the United States soared 57.4% in 2014 to above their most recent peak level in 2006, while investment purchases fell for the fourth straight year, new data shows.
The annual survey by the National Association of Realtors reveals that vacation home sales increased to an estimated 1.13 million last year, the highest amount since NAR began the survey in 2003.
Investment home sales in 2014 decreased 7.4% to an estimated 1.02 million from 1.10 million in 2013. Owner occupied purchases fell 12.8% to 3.23 million last year from 3.7 million in 2013.
Lawrence Yun, NAR chief economist, described the vacation sales market as having seen astonishing growth, nearly doubling the combined total of the previous two years. ‘Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment,’ he said.
‘Furthermore, last year’s impressive increase also reflects long term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years,’ he added.
Overall vacation home sales accounted for 21% of all transactions in 2014, their highest market share since the survey was first conducted. The portion of investment sales fell to 19% compared to 20% in 2013 and owner occupied purchases declined to 60% from 67% in 2013.
‘Despite strong rental demand in many markets, investment property sales have declined four consecutive years to their lowest share since 2010 as rising home prices and fewer distressed properties coming onto the market have further reduced the number of bargains available to turn into profitable rentals,’ said Yun.
The median sales price of both vacation and investment homes declined in 2014. The median vacation home price was $150,000, down 11.1% from $168,700 in 2013. The median investment home sales price was $125,000, down 3.8% from $130,000 a year ago.
According to Yun, the decrease in vacation and investment sales prices is likely due to the increase in vacation and investment buyers purchasing condos and townhouses, which contributed to a decline in the median size of 200 square feet for both.
Additionally, the rise in vacation home buyers purchasing distressed properties and buying in the South, where home prices are often lower, contributed to the overall decline in the sales price of vacation homes.
The share of vacation home buyers who paid in cash fell to 30% from 38% in 2013. Investment buyers who paid in cash decreased to 41% from 46% a year ago. Of buyers who financed their purchase with a mortgage, nearly half, 48%, of vacation home buyers and 41% of investment buyers financed less than 70% of the purchase price.
The data also shows that 45% vacation homes and 44% of investment homes purchased in 2014 were distressed properties, either a home in foreclosure or a short sale. In 2013, 42% of vacation homes and 47% of investment home purchases were distressed.
The typical vacation buyer in 2014 had a higher median household income at $94,380 than those in 2013 at $85,600 and purchased a property that was further away at a median distance of 200 miles than a year ago when it was 180 miles. Buyers plan to own their property for a median of six years, unchanged from 2013.
Although 54% of vacation home buyers bought a single family home, the share of those buying a condo, 27%, or a townhouse or row house, 18%, increased from a year ago. Some 40% of vacation home buyers chose a property in a beach area, 19% in the country and 17% in the mountains.
One third of vacation home buyers plan to use their property for vacations or as a family retreat, 19% plan to convert it into their primary residence in the future, and 13% bought for potential price appreciation while the same share purchased because of low real estate prices and because the buyer found a good deal.
A breakdown of the data shows that 56% of vacation homes were in the South, up from 41% in 2013, while 25% bought the West, down from 28% in 2013, 15% bought in the Northeast, down from 18% in 2013 and 14% bought in the Midwest, a figure unchanged from a year ago.
This article was republished with permission from Property Wire.