20 Apr Vacation Sales Cool Off, But Investment Sales Surge

Fewer households decided to purchase a vacation home last year, but despite the slide, vacation homes remain at their second highest level in nearly a decade.

Snapshot of Vacation-Home Purchases

Property Type: 58% purchase a single-family home; 25% buy a condo; 13 percent a townhouse or row house.

Location: 40% purchased in a beach area; 19% purchased in the mountains or at a lakefront; 16% purchased in the country.

Purpose: 37% purchased for vacations or as a family retreat; 16% bought for future retirement plans; 7% bought to generate income through renting the property.

Ownership Timeframe: Buyers plan to own their property for a median of 7 years.

Property Distance: A median of 200 miles away from a primary residence.

However, more second-home buyers are choosing to invest.  In 2015, investment purchases rose for the first time in five years, according to the National Association of Realtors 2016 Investment and Vacation Home Buyers Survey.  The survey covers existing and new home transactions in 2015.

The median sales price of both vacation and investment homes jumped in 2015, NAR reports.  The median vacation home price was $192,000, up 28 percent from $150,000 in 2014.

Vacation home sales last year dropped to an estimated 920,000, down 18.5 percent from a recent peak of 1.13 million in 2014, according to NAR.  Still, vacation sales were at the second highest amount since 2006 (1.07 million).

“Baby boomers at or near retirement continue to propel the demand for second homes, although headwinds softened the overall volume of vacation sales last year,” says Lawrence Yun, NAR’s chief economist.  “The expanding pool of buyers amidst a dwindling number of bargain-priced properties led to tighter supply and fewer sales and caused the price of vacation homes to rise.  Furthermore, the turbulence that hit the financial markets the second half of the year likely seized some would-be buyers’ available cash.”

Investment Purchases Rebound

Snapshot of Investment-Home Purchases

Property Type: 62% bought a detached single-family home.

Location: 29% purchased in urban areas and 37% purchased properties in the South.

Purpose: 42% bought for rental income; 16% because of low prices and finding a good deal; and 14% because of potential price appreciation.

Property Distance: A median distance of 22 miles away from their primary residence.

Investment-home sales climbed 7 percent in 2015, reaching an estimated 1.09 million from 1.02 million in 2014.  Investment purchases that are owner-occupied increased 15.9 percent to 3.74 million – the highest level since 2007.

“Despite a smaller share of distressed properties coming onto the market, investment purchases reversed course in 2015 after declining for four straight years,” says Yun.  “Steadily increasing home prices and strong rental demand appear to be giving more individual investors assurance that purchasing real estate will diversify their portfolios and generate additional income if they decide to rent out the home.”

Source: National Association of REALTORS