Sales of second homes, which include vacation and investment homes, soared in 2011 to their highest market share since the height of the housing boom, according to an annual report from the National Association of Realtors.

NAR

Sales of second homes, which include vacation and investment homes, soared in 2011 to their highest market share since the height of the housing boom, according to an annual report from the National Association of Realtors.

NAR’s 2012 Investment and Vacation Home Buyers Survey includes 2,241 responses from U.S. households who bought either new or existing homes in 2011. The association conducted the survey in March 2012 and controlled for age and income.

Investors lead the surge in second-home sales. Sales of investment homes climbed 64.5 percent in 2011, to 1.23 million, from 749,000 the year before, the report said. At the same time, sales of vacation homes increased 7 percent to 502,000, compared to 469,000 in 2010.

Combined, second-home sales accounted for 38 percent of all home sales last year (27 percent investment homes, 11 percent vacation homes), up from 27 percent in 2010 (17 percent investment homes, 10 percent vacation homes). That’s the highest share since 2005, when second-home sales made up 40 percent of sales overall.

Meanwhile, owner-occupied home sales fell 15.5 percent year over year in 2011, to 2.78 million, the report said.

"During the past year investors have been swooping into the market to take advantage of bargain home prices," said Lawrence Yun, NAR’s chief economist, in a statement.

"Rising rental income easily beat cash sitting in banks as an added inducement. In addition, 41 percent of investment buyers purchased more than one property."

Second-home buyers weren’t hesitant to use cash, Yun added. About four out of 10 vacation-home buyers paid in cash last year, while roughly half of investment buyers did. Of those who did finance their purchase, the median down payment was 27 percent, the report said.

Investors paid somewhat more for their purchases in 2011 than in 2010, though vacation-home buyers paid less. The median price for an investment home last year rose 6.4 percent to $100,000 last year, while the median price for a vacation home fell 19.1 percent to $121,300. Distressed properties accounted for half of investment-home sales, 39 percent of vacation-home sales, and 29 percent of primary-home sales.

Primary-home buyers paid a median $167,700 for their purchase in 2011, down 5.1 percent from the year before.

Investors and vacation-home buyers tended to be older and more affluent than primary-home buyers. While the latter had a median age of 39 and earned a median household income of $72,400, the typical investment-home buyer was 50 years old and earned a median household income of $86,100 and the typical vacation-home buyer was also 50 years old with a median income of $88,600.

Investors planned to hold the property for a median five years and generally bought a home that was a median 25 miles from their primary residence. In an indication of flipping activity, 5 percent of homes purchased by investment buyers in 2011 have been resold, up from 2 percent in 2010, the report said. Investors typically bought in suburban areas.

Vacation-home buyers planned to hold the property for a median 10 years and purchased a property that was a median 305 miles away. Vacation-home buyers typically bought in rural or suburban areas.

As in the 2010 survey, the South accounted for the biggest share of second home purchases in 2011, followed by the West.

Region of Home Purchase Primary
Residences
Vacation
Properties
Investment
Properties
Northeast 20% 15% 15%
Midwest 23% 12% 17%
South 35% 42% 44%
West 22% 30% 23%
Outside the U.S.  0% 1% 0%

Source: NAR

Also as in the 2010 survey, second-home buyers, especially investors, were slightly more ethnically diverse than primary-home buyers. Among primary-home buyers, 82 percent were white, 8 percent were Asian, 7 percent were black, 5 percent were Hispanic, and 1 percent were "other."

Among buyers of investment properties, 76 percent were white, 13 percent were Asian, 8 percent were black, 6 percent were Hispanic, and 1 percent were "other."

Roughly half of second-home buyers purchased through a real estate agent or broker. Second-home buyers were somewhat more likely than primary-home buyers to buy through a foreclosure or trustee sale or directly from an owner the buyer knew.

Purchase Method Primary
Residences
Vacation
Properties
Investment
Properties
Through a real estate agent or broker 69% 55% 48%
Foreclosure or trustee sale 5% 14% 17%
Directly from owner whom the buyer knew 9% 16% 17%
Directly from owner whom the buyer didn’t know 5% 8% 7%
Directly from builder or builder’s agent 9% 3% 5%
Other 3% 5% 6%

Source: NAR

Although the report released today is based on responses from U.S. addresses, according to a separate, monthly survey (the Realtors Confidence Index), international purchases accounted for about 3 percent of transactions in 2011, "which would be in addition to today’s findings," NAR spokesman Walter Molony told Inman News.

Because foreign buyers are often limited in how long they are allowed to stay in the U.S. within a given year, their purchases tend to be for either vacation or investment purposes, or both. A recently released Inman News report, "10 Hot Spots for Global Homebuyers," highlights the most popular U.S. areas for international buyers as well as their top countries of origin, preferred property types, and how they find the real estate professionals they work with.

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