The Realtors were out Wednesday morning with their annual survey of vacation and investment home sales, this one for 2015. Vacation home sales cooled off in 2015 but remained at the second highest level in nearly a decade, while investment purchases increased for the first time in five years. Sales prices of both types surged.
According the National Association of Realtors 2016 Investment and Vacation Home Buyers Survey, which tracks both existing and new homes, sales of vacation homes in 2015 fell to an estimated 920,000, down 18.5% from their most recent peak level of 1.13 million in 2014 but still ahead of the pre-crash total of 1.07 million in 2006. Investment-home sales rose 7% to an estimated 1.09 million from 1.02 million in 2014. Owner-occupied purchases jumped 15.9% to 3.74 million last year from 3.23 million in 2014 – the highest level since 2007 (3.93 million).
“Baby boomers at or near retirement continue to propel the demand for second homes, although headwinds softened the overall volume of vacation sales last year,” said Lawrence Yun, NAR chief economist. “The expanding pool of buyers amidst a dwindling number of bargain-priced properties led to tighter supply and fewer sales and caused the price of vacation homes to rise. Furthermore, the turbulence that hit the financial markets the second half of the year likely seized some would-be buyers’ available cash.”
The median sales price of both types of homes soared in 2015, with the vacation home price up 28% from last year to $192,000, and the investment-home price up 15.3% to $143,500..
According to Yun, the South, particularly Florida, was the most popular destination for vacation buyers. While increased buyer demand contributed to the run-up in prices, it also likely squeezed less affluent households looking to purchase vacation properties. Vacation-home sales accounted for 16% of all transactions in 2015 – down from 2014 (21%), but still the second highest share since the survey was first conducted in 2003. The portion of investment sales remained unchanged from a year ago at 19%, and owner-occupied purchases increased to 65% from 60% in 2014).
“Despite a smaller share of distressed properties coming onto the market, investment purchases reversed course in 2015 after declining for four straight years,” says Yun. “Steadily increasing home prices and strong rental demand appear to be giving more individual investors assurance that purchasing real estate will diversify their portfolios and generate additional income if they decide to rent out the home.”
The survey found that in addition to longer-term rentals, investors are most likely to attempt to rent their properties for less than 30 days. Among investors, 42% did or tried to rent their property in 2015 and plan to rent their property in 2016. 24% of vacation buyers did or tried to rent their property in 2015 and plan to rent their property this year. Vacation buyers are more likely to use a property manager or social media to rent their property, while investors are more likely to use a traditional real estate agency.
38% of vacation buyers paid in cash, up from 30% in 2014, while cash purchases by investors dropped to 39% from 41% a year earlier. Of buyers who financed their purchase with a mortgage, 52% of vacation buyers and 44% of investors financed less than 70% of the purchase price. 36% of vacation buyers (45% in 2014) and 39% of investors (44% in 2014) purchased a distressed property.
Characteristics of Vacation-Home Purchases
Among other findings, vacation-home buyers in 2015 had a higher median household income ($103,700) than those in 2014 ($94,380) and purchased a property that was a median distance of 200 miles away from their primary residence (unchanged from a year ago). Buyers plan to own their property for a median of 7 years, an increase from 6 years in 2014.
With more vacation buyers purchasing single-family homes (58%) compared to a year ago (54%), the share of those buying a condo (25%) or a townhouse or row house (13%) decreased in this year’s survey. 40% of vacation buyers purchased in a beach area, 19% purchased in the mountains or at a lakefront and 16% purchased a vacation home in the country. Nearly half of all vacation homes bought last year were in the South (47%; 41% in 2014), 25% were in the West (unchanged from a year ago), 15% in the Northeast (unchanged from a year ago) and 13% in the Midwest (14% in 2014). More than a third of vacation buyers plan to use their property for vacations or as a family retreat (37%), 16% bought for future retirement plans and only 7% purchased to generate income through renting the property, a decrease from 11% in 2014.
The typical investment-home buyer in 2015 had a median household income of $95,800 ($87,680 in 2014) and bought a detached single-family home (62%) that was a median distance of 22 miles from their primary residence (24 miles in 2014). Investment buyers last year purchased property for a variety of reasons, with an increasing share from 2014 citing rental income as the primary reason (42%; 37% in 2014), followed by low prices and the buyer found a good deal (16%), and for potential price appreciation (14%). Investment purchases in urban areas increased to 29% (26% in 2014). Purchased properties from investment buyers were more likely to be in the South (37%) and in a suburban area (41%).
More than 80% of both vacation buyers and investment buyers said they believe that now is a good time to purchase real estate.
NAR’s 2016 Investment and Vacation Home Buyers Survey, conducted in March 2016, surveyed a sample of households that had purchased any type of residential real estate during 2015. The survey sample was drawn from a representative panel of U.S. adults monitored and maintained by an established survey research firm. A total of 2,053 qualified adults responded to the survey. Respondents were sampled to meet age and income quotas representative of all home buyers drawn from the NAR 2015 Profile of Home Buyers and Sellers.