The moribund market for vacation homes that developed early on in the housing downturn rebounded in 2009, the National Association of Realtors reported Wednesday. The group said that sales of homes to investors, on the other hand, dropped sharply from 2008 levels. As a result, sales of second homes, new and existing, for all housing types, were down 8.4% to 1.49 million in 2009 compared to the prior year.
According to the Realtors Investment and Vacation Home Buyers Survey for 2010, an annual snapshot of activity in the market for second homes, vacation-home sales rose 7.9% to 553,000 last year from 2008. While up, sales were off 48.2% from peak in 2006, however.
Half of vacation homes purchased were in the South, 21% in the West, 17% in the Midwest and 12% in the Northeast. Seven of 10 (71%) were detached single-family homes, and 26% were new construction.
The median price of vacation homes was up as well, to $169,000 in 2009, compared with $150,000 in 2008. That was the first increase since the median price of a vacation home peaked at $204,100 in 2005.
The market for investment homes, however, took a sharp turn down, with sales off 15.9% from 2008 to 940,000, 59.4% below peak sales of 2.32 million in 2005. The median price was down 2.8% to $105,000. Regionally, 35% of investment-home sales were in the South, 25% in the West, 24% in the Midwest and 16% in the Northeast. Only 16% were new homes, and 63% were detached single-family residences.
In comparison, primary-residence sales, which account for 73% of all sales, rose 7.1% to 4.04 million in 2009. The market share of homes purchased for investment was 17% in 2009, down from 21% in 2008, while the vacation-home share rose a point to 10%. The total share of second homes declined from 30% percent in 2008 to 27% last year. "First-time buyers were at record levels in 2009 with fewer sales of second homes," said Lawrence Yun, NAR chief economist.
By type of environment, 25% of vacation homes sold and 26% of investment sales were in small towns. Another 30% of vacation homes were in rural areas, compared to 15% of investment homes. Suburbs accounted for 23% of vacation-home sales and 35% of investment-home sales, and urban areas netted 6% of vacation-home sales and 18% of investment-home sales. Vacation homes took a 17% share of sales in resort areas compared to only 5% of investment-home transactions.
Sales of second homes were strongly influenced by buyers with cash. Three of ten sales of vacation properties were cash deals; half of investment-home sales were done without a mortgage.
The typical vacation-home buyer was 46 years old, had a median household income of $87,500, and purchased a property that was a median distance of348 miles from their primary residence; 34 percent were within 100 miles and 40 percent were more than 500 miles. Investment-home buyers last year had a median age of 45, earned $87,200, and bought a home that was relatively close to their primary residence--a median distance of 24 miles. Roughly one in four investment buyers purchased more than one property in 2009. Three of four second-home buyers were married couples.
"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," said Yun. "Investment buyers primarily seek rental income, with six in 10 planning to rent to others, although one in five wants a family member, friend or relative to use the home."
Looking ahead, the Realtors see continued improvement in the market for second homes.
"Historically, people become interested in buying a second home in their mid 40s," Yun said. "The large number of people who are now in their 30s and 40s will dominate the second-home market in the coming decade with a strong underlying demand, although sales in a given year will vary depending on the economy. Mortgage lending for second homes was extraordinarily tight in 2009 but it is likely to ease a bit in 2010."
The NAR, citing Census data, noted there are currently 40.1 million people in the U.S. aged 50-59. These are the people who established records for second-home sales. 44.4 million people are now in the primary buying demographic of 40-49 years old, and another 40.6 million are 30-39.
The survey, conducted in March, is based on 1,930 usable responses.