Sales of new and previously owned vacation homes rose last year, while investment-home sales dropped, according to a survey report by the National Association of Realtors.
NAR’s 2010 Investment and Vacation Home Buyers Survey includes responses from residents in 1,930 randomly selected households who bought residential real estate in 2009. The association conducted the survey in March 2010 and controlled for age and income.
Vacation-home sales increased 7.9 percent to 553,000 in 2009 from 513,000 in 2008, the report said. The market share for vacation homes rose to 10 percent, from 9 percent in 2008.
At the same time, investment-home sales declined 15.9 percent, to 940,000 last year from 1.12 million in 2008, the report said. The market share for such homes fell to 17 percent, from 21 percent in 2008.
"The typical vacation-home buyer is making a lifestyle choice, with nine out of 10 saying they intend to use the property for vacations or as a family retreat. Investment buyers primarily seek rental income," said Lawrence Yun, the association’s chief economist, in a statement.
Sales of primary residences grew by 7.1 percent, to 4.04 million in 2009 from 3.77 million in 2008, the report said. With that increase, the share for second homes overall dipped to 27 percent in 2009, compared with 30 percent in 2008.
"First-time buyers were at record levels in 2009, with fewer sales of second homes," Yun said.
A quarter of vacation-home buyers plan to rent out their homes to others, compared to 59 percent of investment-home buyers. Only 19 percent of investment-home buyers hope to use the property as a family retreat. Slightly more investors (18 percent) than vacation-home buyers (13 percent) bought the property for a relative or friend to use.
According to the U.S. Census, the national vacancy rates in fourth-quarter 2009 were an estimated 10.7 percent for rental housing and an estimated 2.7 percent for homeowner housing. While the homeowner rate was not statistically different from the fourth quarter of 2008, the rental vacancy rate was 10.1 percent higher.
"The rental market is soft due to the economy, and investors realize it is much higher risk to secure occupancy in their rental property than in prior years,"said Alexis Eldorrado, managing broker of Eldorrado Chicago Real Estate. …CONTINUED
About 8 percent of investment-home buyers vs. 26 percent of vacation-home buyers said they plan to use the property as a primary residence in the future, the report said.
The median home price for a primary residence fell 5.6 percent last year to $185,000, and the median price for investment properties also fell, by 2.8 percent to $105,000. About 15 percent of buyers paid all cash for their primary residences, and this was unchanged from 2008. All-cash buyers made up 48 percent of investment-home buyers, according to the latest survey, up from 42 percent in 2008.
Meanwhile, the median price for vacation homes rose 12.7 percent to $169,000, and 29 percent paid in cash. Even with a rise in vacation-home prices, some Realtors say their clients think now is a good time to buy.
"Ultimately (a vacation home) has been a dream for many, and with the sudden shift in market prices due to the economy, many people realize it is a good time to buy. People are buying today at prices from 10-12 years ago," Eldorrado said.
Regionally, half of vacation homes sold in 2009 were in the South, 21 percent in the West, 17 percent in the Midwest and 12 percent in the Northeast, the report said.
"I would say that (NAR’s) data is pretty close to being spot on, with a couple of exceptions," said James Crumbaugh, CEO of Allison James Estate and Homes, which does business in 11 states and deals mostly in waterfront properties, beachfront condos, golf course communities and planned resort communities.
Those exceptions are Florida and California — both areas whose prices Yun said have become especially attractive for buyers over the past year.
"In Southwest Florida, normally 70 percent of our business is in vacation homes or second homes. Most of these buyers plan on eventually retiring in Southwest Florida. However, the investors have (been) buying up the fire sales among these properties for the last year or so, and I would guess that close to 50 percent of these sales are now investor sales," Crumbaugh said.
"Prices are going up, and as a result the investors have determined that the bottom has passed. We are actually starting to see an inventory problem on the horizon for Southern California and Southwest Florida, so prices should continue to climb," he added.
Loren Sanders, a Realtor at Windermere Exclusive Properties in San Diego County, Calif., has seen a rise in both vacation home purchases and investment purchases. Distressed properties have played a key part in encouraging investment purchases, he said.
"The buy, fix and flip people are making good money, which draws more players."
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