Vacation home sales in the United States rose strongly in 2013, but investment purchases fell below the levels seen in the previous two years, according to new data from the National Association of Realtors.
The NAR’s 2014 investment and vacation home buyers survey, which covers existing and new home transactions in 2013, shows vacation home sales jumped 29.7% to an estimated 717,000 last year from 553,000 in 2012. Investment home sales fell 8.5% to an estimated 1.10 million in 2013 from 1.21 million in 2012.
The data also shows that owner occupied purchases rose 13.1% to 3.7 million last year from 3.27 million in 2012. The sales estimates are based on responses from households and exclude institutional investment activity.
NAR chief economist Lawrence Yun said that the improvement in the vacation home market has been expected. ‘Growth in the equity markets has greatly benefited high net worth households, thereby providing the wherewithal and confidence to purchase recreational property,’ he said.
But he added that vacation home sales are still about one third below the peak activity seen in 2006. However, vacation home sales accounted for 13% of all transactions last year, their highest market share since 2006, while the portion of investment sales fell to 20% in 2013 from 24% in 2012.
Yun said the pullback in investment activity is understandable. ‘Investment buyers slowed their purchasing in 2013 because prices were rising quickly along with a declining availability of discounted foreclosures over the course of the year,’ he pointed out.
‘In 2011 and 2012, investment property was a no brainer because home prices had sharply over corrected during the downturn in many areas, creating great bargains that could be quickly turned into profitable rentals. With a return to more normal market conditions, investors now have to evaluate their purchases more carefully and do their homework,’ Yun added.
The median investment home price was $130,000 in 2013, up 13% from $115,000 in 2012, while the median vacation home price was $168,700, up 12.5% from $150,000 in 2012.
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All cash purchases remained fairly common in the investment and holiday home market with 46% of investment buyers paying cash in 2013, and 38% of vacation home buyers doing so.
Of buyers who financed their purchase with a mortgage, large down payments continued to be the norm in 2013. The median down payment for investment buyers was 26%, while vacation home buyers typically put 30% down.
The data also shows that some 47% of investment homes purchased in 2013 were distressed homes, as were 42% of vacation homes.
Lifestyle factors remain the primary motivation for vacation home buyers, while rental income is the main factor in investment purchases.
The typical vacation home buyer was 43 years old, had a median household income of $85,600 and purchased a property that was a median distance of 180 miles from his or her primary residence. Some 46% vacation homes were within 100 miles and 34% were more than 500 miles. Buyers plan to own their recreational property for a median of six years, down from 10 years in 2012. Some 5% vacation home buyers had already resold their property, while another 9% plan to sell within a year.
‘This reflects the 28% of recreational property buyers who said they purchased to diversify investments or saw a good investment opportunity,’ Yun said.
Buyers listed many reasons for purchasing a vacation home with 87% wanting to use the property for vacations or as a family retreat, and 31% planning to use it as a primary residence in the future.
Some 28% said they wanted to diversify their investments or saw it as a good investment opportunity, while 23% planned to rent to others and 22% intended it for use by a family member, friend or relative.
The report shows that 41% of vacation homes purchased last year were in the South, 28% in the West, 18% in the Northeast and 14% in the Midwest.
Investment home buyers in 2013 had a median age of 42, earned $111,400 and bought a home that was relatively close to their primary residence, a median distance of 20 miles.
Half of investment buyers said they purchased for rental income, 34% wanted to diversify their investments or saw a good investment opportunity, and 22% bought for a family member, friend or relative to use, often a son or daughter while attending college.
Some 7% of homes purchased by investment buyers last year have already been resold, and another 10% are planned to be sold within a year. Overall, investment buyers plan to hold the property for a median of five years, down from eight years in 2012.
Some 38% of investment properties purchased last year were in the South, 25% in the West, 18% in the Northeast and 19% in the Midwest.
More than eight out of 10 second home buyers, both for vacation and investment homes, said it was a good time to buy.
This article was republished with permission from Property Wire.