From the Florida coast to Vancouver Island, buyers are snapping up vacation homes like hot cakes. The run on second homes has builders such as Toll Brothers going back over its sales lists to look for potential customers. And for the first time, Toll Brothers is shifting away from pitches aimed solely at those close to retirement and also focusing on families. "We're certainly mining our database of past purchasers and cross-selling our locations in sales centers across the country," says Kira McCarron, Toll Brothers vice president of marketing. "We see the fast-growing second-home market as a terrific opportunity, given our focus on luxury homes and resort communities."
In 2002, 7 percent of home sales were second residences, according to the U.S. Census. That's not a huge number, but it is 100,000 more than in any previous year.
Experts attribute the bountiful sales to boomers, who are never far from any market trend. "Boomers are community-oriented people who want their kids and their friends around them," says Marta Borsanyi, principal of the Concord Group, in Newport Beach, Calif. "Demographically, we're looking at 14 more years of the peak of the baby boom hitting 52 years of age" -- the age of most people who buy a second home. "When you look at that curve, it's absolutely shocking."
Builders are zeroing in on that growing market segment with communities that focus on recreation -- the primary motivation for purchasing a second home, according to a 2002 survey by the National Association of Realtors.
It's a product type that WCI Communities, in Bonita Springs, Fla., has been honing for years. Second residences account for 60 percent of WCI's revenues, which increased from $448 million in 1998 to $1.2 billion in 2002.
Because the profiles of vacation-home buyers vary widely from singles and young families to retirees, WCI offers something for everyone. Its second homes range from carriage houses and condominiums to single-family homes, and in price from $150,000 to $12 million. And the resort communities offer an array of amenities that appeal to multigenerational living -- not just the token golf courses, but spas, nature trails, marinas, and fitness centers.
The Burnt Store Marina & Country Club at Punta Gorda, for example, whose mid-rise waterfront condos are selling for $500,000 to $900,000, boasts 500 deep-water boat slips and access to nearby attractions such as a family water park, a nature center and planetarium, and a shopping mall. "Whatever home people buy in our communities is a byproduct of the lifestyle we offer," says Michael Curtin, WCI senior vice president of marketing and sales. "They settle on a location, then a community, then fit the home into those parameters."
Goods and Services
Toll Brothers' vacation-home communities also emphasize lifestyle and luxury. "We're looking for locations that have fun things nearby, not necessarily just self-contained amenities," says McCarron. "Places where they can eat well and have fun, whether it's going to the beach, golfing, boating, or, when the lots allow for it, swimming in their own private pool." While the Huntingdon Valley, Pa.-based builder is developing second-home communities in obvious vacation destinations such as Bethany Beach, Del., Ocean City, Md., and Petoskey, Mich., "there's not a part of the country we're not going after," she says.
Other buyers want to rent out their houses for a good part of the year. At Beazer Homes, which is building second residences in Phoenix, Myrtle Beach, S.C., and Jacksonville and Orlando, Fla., certain products are designed to help buyers manage that process. In Orlando, for example, buyers come from as far away as England, Scotland, and South America and request a furnished house or condo with a lockout closet, plus help with leasing. Once they buy from Beazer, they are referred to a management company the builder partners withwho will handle their rentals for them.
Vacation homes live a little differently than traditional homes do, too. Marilyn Gardner, vice president of sales and marketing at Beazer Homes, says buyers want less space than they have in their primary home but all the bells and whistles. There's no formality here: Beazer's layouts feature open plans with plenty of space to gather and party. Large closets, garages, and laundry rooms are sacrificed for extra bedrooms and two master suites.
According to Borsanyi, the emphasis on multiple bedrooms is relatively new. Two decades ago, an affluent couple buying a 3,000-square-foot home would want two bedrooms and a den, she says. Now, the same buyer wants six bedrooms because they're using the house for family gatherings. "I remember in early focus groups people said they would put up family and friends in a nearby hotel. Now they'll have none of that. They want people all around them. It has to do with the community spirit of the boomers."
Builders, too, are being diligent about staying in touch with prospective buyers. If the man-made amenities of vacation enclaves tend to overlap with those in age-restricted communities, so do the sell strategies. These are people who live at a distance and have plenty of time to make up their mind. And they respond to messages about lifestyle, luxury, and rewards.
Kimball Hill Homes develops a database of customers who visit its resort communities, gathers information about what they're looking for, and then tries to build a relationship of trust for the next year or two -- as long as it takes to close the sale. "We make sure we're sending literature regularly about communities they're interested in," Heimbinder says. Sales representatives send personal letters letting them know, for example, that a new community with the vista they want is being developed. "There has to be some specialized communication so these people recognize they're not just in someone's card file," he says. "They recognize you're looking at them as individuals. The effort is more intensive with respect to the number of contacts and the type of information you try to collect."
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Most of WCI Communities' second-home buyers hail from the East and Midwest, although it does have European customers. The builder advertises in national print media such as The Wall Street Journal and USA Today, and vacation-targeted lifestyle magazines. A "sizable percentage" of those leads result in people who tour the communities and ultimately buy, Curtin says. "Those folks who inquire for information are very educated prior to their visit; they really do their homework and narrow down their choices." To get out the word, the builder also relies on referrals, direct mail to its database of past customers, and its Web site, which attracts more than 100,000 different people every month. Visitors to Pulte Homes' Web site can register to receive information about new communities that interest them. And it has just begun an e-mail marketing program that reaches out to its existing customers. Are there plans to sell primary and secondary homes as a package by, say, offering a rebate on house number two? "We're not selling them together, but I could see the industry going in that direction in the future," says Jim Zelinski, Pulte's vice president of sales and marketing. Some builders are already tweaking the formula for ownership. Pulte is trying out long-term rentals to get people intrigued with the prospect of owning a second home. And in one Florida community, WCI is partnering with Hyatt to sell timeshares.
Blurring the Lines
While the vacation home segment is attracting greater focus among big builders, it hasn't resulted in broader scale management or organizational shifts yet. "We have reorganized our thinking in terms of tracking demographics and looking for land that would be appropriate to second homes," says McCarron, at Toll Brothers. "But the legwork and due diligence efforts are mostly regional."
WCI president Jerry Starkey, in a recent company earnings announcement, said the luxury/second-home market has actually been running a little soft in certain segments compared to past quarters. The exception has been the company's $2-million-a-unit premier tower homes in Marco Island and North Miami, Fla., which he said were gaining momentum. However, he was bullish on the long-term prospects for the segment, noting the number of baby boomers hitting prime earning and inheritance years. He also cited figures from American Demographic magazine reporting that there are more than 6 million second homes in the U.S. and that "the growth rate of second-home purchases is running double the rate achieved in the 1990s," he said.
Big builders are, however, counting on strong brand-name recognition to sell homes outside their centers of operation. "We're now trying to associate all of our brands much more closely," as in the new slogan, "Del Webb, Part of the Pulte Homes Family," Zelinski says. "It's really key to satisfy the homeowner the first time around," he adds. "There's a huge focus on quality."
In some regions of the country, business and second-home destinations are starting to converge. That's good news for builders, since it's easier to focus their efforts in metro areas where people buy primary homes. Kimball Hill's Heimbinder says there's a strong market for people who have moved to Florida full time and want to buy a second home where they came from. Retirees who are splitting their time are snapping up townhouses and condos in Chicago. "This is a society where at some point you might not be able to tell if this is a second home -- it's another home," Heimbinder says. "But the characteristics are different than the traditional home."
Learn more about markets featured in this article: Orlando, FL.