Sales of vacation and investment homes dropped 1.8% and 7.8%, to 543,000 and 867,000 respectively, in 2010 as sales of primary residences fell 5.6% to 3.81 million, the National Association of Realtors reported Wednesday.
While the overall numbers were down, the respective shares of total sales of vacation and investment homes remained stable at 10% and 17%, respectively, the NAR said.
Prices dropped sharply. The median vacation-home price was $150,000 in 2010, down 11.2% from 2009; the median investment-home price was $94,000, a drop of 10.5% from 2009. The median primary residence price, in comparison, fell only 4.5% to $176,700.
"Despite extraordinarily tight credit conditions for purchasing a second home, the market share for vacation and investment homes held steady," said Lawrence Yun, chief economist for the Realtor group. "A sizeable number of buyers made deals with all-cash offerings."
All cash deals accounted for 59% of investment-home transactions in 2010.All cash was used in 36% of vacation-home sales. Foreclosure/trustee sales comprised 17% of investment purchases and 11% of vacation-home sales in 2010, compared with 5% of primary purchases. "Second home buyers purchased more distressed homes at discount than did buyers of primary residences,"Yun said.
The typical vacation-home buyer in 2010 was 49 years old, had a median household income of $99,500 and purchased a property that was a median distance of 375 miles from the primary residence; 31% of vacation homes were within 100 miles and 41% were beyond 500 miles.
Investment-home buyers averaged 45 years old with a household income $87,600 and bought a home that was a median distance of 19 miles from the primary residence.
"The fall in home prices has opened opportunities for more families to enter the second-home market," Yun said.
The median income of vacation-home buyers in 2010 was slightly above 2007 when it was $99,100; the median income of investment-home buyers was 5.7% below $92,900 in 2007.
"Even if purchases are delayed due to economic circumstances, the underlying long-term demand -- the desire for purchasing second homes -- remains because people in their 30s and 40s will reach the prime age for buying and will drive the second-home market in coming decades as conditions permit,"Yun said.
Lifestyle was, as usual, the driving factor in sales of vacation homes, while the desire for rental income motivated most investment buyers.Vacation homes were more likely to be located in a rural area, while investment homes were more likely to be in a suburban location.
"Vacation-home buyers want the property for their own personal use, with 84% percent saying the primary reason for buying was to use for vacations or as a family retreat," Yun said. Nearly half investment buyers said they sought to diversify their investments or saw a good investment opportunity, he added.
Among vacation home buyers, 34% said they planned to use the property as a primary residence in the future, as did 10% of investment buyers.Vacation-home buyers said they planned to keep the property for a median of13 years while investment buyers plan to hold for a median of 10 years.
Regionally, 36% of vacation homes purchased in 2010 were in the South, 27% in the West, 19% in the Northeast and 15% in the Midwest. Another 3% were located outside of the U.S.
Among investment properties, 32% were in in the South, 24% in the West, 21% in the Northeast, 20% in the Midwest and 3% outside the U.S.
NAR used Census data to estimate that there were 7.9 million vacation homes and 41.6 million investment units in the U.S. in 2010, compared with 74.8 million owner-occupied homes.