As the pandemic extends into late summer, Americans have been fulfilling their wanderlust by traveling to small scenic towns. Big Sky, Montana, has become a crowd favorite due to plenty of opportunities for skiing, rafting and fishing — resulting in the city’s ascent to the top of Vacasa’s “2020 Top 25 Best Places to Buy a Vacation Home” list released on Tuesday.
“We’ve seen a surge in demand for vacation homes across our portfolio, and real estate transactions are up as much as 35 percent in some of our vacation rental markets across the country when compared to July 2019,” Vacasa Vice President of Sales and Marketing Shaun Greer said in a prepared statement. “Many buyers believe we will be impacted by COVID-19 for the next 12 to 18 months, and are seeking a place close to home where they can get away with their families, work remotely if needed, and generate income when the home is not in use.”
Big Sky moved up 10 spots from 2019, with vacation-homeowners raking in an annual gross rental revenue of $79,726. With a median home price of $541,842, Big Sky is one of the more expensive markets on Vacasa’s list; however, a capitalization rate (net income divided by purchase price) of 9.2 percent makes the investment worth it.
“This four-season destination draws guests from surrounding states seeking natural beauty and plenty of activities,” the report read. “From the endless miles of snowy terrain that brings skiers, snowboarders, and snowmobilers to the area, to the spring and summer months ripe for whitewater rafting, fly fishing, and canoeing, there’s always something to discover in Big Sky.”
Cape Hatteras, North Carolina, secured second place with a median home price of $379,248 and a cap rate of 8.6 percent. Five hours from Raleigh, Cape Hatteras is a favorite vacation spot for North Carolinians who want to spend their summers relaxing by the beach.
Poconos, Pennsylvania; Gatlinburg, Tennessee; and Dauphin Island, Alabama, rounded out the top five with median home prices ranging from $200,000 to $380,000 and cap rates between 7.8 and 8.6 percent. On a state-by-state level, Colorado, California and Florida dominated the list with more than three markets being pinpointed as investment hotspots.
Looking forward, Vacasa predicts vacation home markets will continue to rebound as legislators loosen or lift social distancing restrictions and low-interest rates push buyers to consider entering the short-term rental market.
“In mid-March, COVID-19 had a swift and detrimental impact on vacation rental markets across the country,” the report explained. “Fortunately, as restrictions were lifted by local governments, people were eager to travel and rebooked their vacations at an almost alarming rate.”
“In a post-pandemic environment, we expect nearly all markets to rebound in terms of both rental rates and occupancy,” it continued.
In terms of purchasing, Vacasa said the pandemic has provided a perfect opportunity for buyers to become vacation-home investors, as mortgage interest rates for second homes hover around 3.5 percent.
“With interest rates so low, and travelers’ preferences shifting toward vacation rentals over hotels, we’re seeing increased interest in purchasing vacation homes,” the report concluded. “So, from a financial standpoint, it’s a great time to purchase a second home as well — especially if you’re able to put 10 to 15 percent down.”