Not surprisingly, the market for vacation and investment homes tanked last year as the economy slipped into deep recession and the overall housing market foundered.
The National Association of Realtors said Monday morning that its 2008 Investment and Vacation Home Buyers Survey reported vacation-home sales dropped 30.8% to 512,000 last year from 740,000 in 2007, while investment-home sales fell 17.2% to 1.12 million in 2008 from 1.35 million in 2007. In comparison, primary residence sales declined 13.2% to 3.77 million in 2008 from 4.34 million in 2007.
The median price of a vacation home was $150,000 in 2008, down 23.1% from 2007. The typical investment property cost $108,000 last year, a 28.0% drop from 2007.
"As in the market for primary residences, it appears that many sales of deeply discounted distressed homes are pulling down the median price in the second-home market as well," said Lawrence Yun, NAR's chief economist. According to an NAR analysis of U.S. Census Bureau data, there are 8.1 million vacation homes and 40.5 million investment units in the United States, compared with 75.5 million owner-occupied homes. The market share of homes purchased for investment was 21% last year, unchanged from 2007, while another 9% were vacation homes, compared with a 12% market share in 2007. In 2005, the peak year for home speculation, 40% of sales were second homes.
Some 31% of the vacation home market is comprised of new homes, with only 16% of the investment market held by new construction. 75% of vacation homes purchased in 2008 were detached single-family homes, 18% condos, 5% townhouses or rowhouses, and 7% other. 64% of investment homes were detached single-family homes, 22% condos, 8% townhouses or rowhouses, and 6% other.
According to the study, 26% of vacation homes were purchased in small towns, 23% in rural areas, 23% in resorts, 20% in suburbs, and 8% in an urban area or central city. 28% of investment homes were purchased in a suburb, 20% in an urban or central city area, 23% in rural areas, 22% in small towns, and 6% in resort areas.
The NAR said it remains bullish on the second-home market primarily because there are large numbers of people in the prime years for buying a second home. Currently, 39.2 million people in the United States are ages 50 to 59--a group that dominated sales in the first part of this decade. An additional 44.8 million people are between 40 and 49, and another 40.7 million are 30 to 39.
"While economic factors can affect sales from one year to the next, the fundamental demand from these large population groups will remain," Yun said. "Given that most people become interested in buying a second home in their 40s, the bulge of population approaching middle age should drive the second-home market over the next decade."