Vacation Home Sales Pick up Slack as Investments Wane

Vacation home purchases recoveredrnstrongly in 2013, helping to offset some of the inevitable flagging interest inrninvestment purchases the National Association of Realtors® (NAR) saidrntoday.  NAR’s 2014 Investment and Vacation Home Buyers Survey shows an increase inrnvacation-home sales during the year of 29.7 percent.  There were 553,000 such sales in 2012, anrnestimated 717,000 in 2013.</p

At the same time investment purchases retreatedrnfrom the elevated levels of 2011 and 2012, falling 8.5 percent to 1.10 millionrnin 2013 from 1.21 million in 2012.  Therernwere 1.23 million such sales in 2011.  NAR’srninvestment sales figures do not include institutional sales.  Sales of owner-occupied homes rose 13.1rnpercent to 3.70 million last year from 3.27 million in 2012.</p

NAR Chief Economist Lawrence Yun said the pullback in investment activity is understandable.rn”Investment buyers slowed their purchasing in 2013 because prices were risingrnquickly along with a declining availability of discounted foreclosures over therncourse of the year,” he said. </p

“Inrn2011 and 2012, investment property was a no-brainer because home prices hadrnsharply over corrected during the downturn in many areas, creating greatrnbargains that could be quickly turned into profitable rentals. With a return tornmore normal market conditions, investors now have to evaluate their purchasesrnmore carefully and do their homework.” </p

Yunrnsaid the improvement in the vacation home market was also anticipated.  “Growth in the equity markets has greatlyrnbenefited high net-worth households, thereby providing the wherewithal andrnconfidence to purchase recreational property. rnHowever, vacation-home sales are still about one-third below the peakrnactivity seen in 2006.”</p

Aboutrn13 percent of all 2013 sales were of vacation homes, up from an 11 percentrnshare in each of the previous two years. rnThis was the highest that recreational property share has been sincern2006.  The portion of sales accounted forrnby investment activity fell to 20 percent in 2013 from 24 percent the previousrnyear. </p

Thernmedian investment-home price was $130,000 in 2013, up 13.0 percent fromrn$115,000 in 2012, while the median vacation-home price was $168,700, up 12.5rnpercent from $150,000 in 2012.   Thernmedian owner-occupied home price was $189,000, a 2013 increase of 11.2rnpercent.  All cash purchases were commonrnfor both investment and vacation home transactions as were large downrnpayments.  Forty-six percent ofrninvestment purchases were all cash while the median downpayment for buyersrnobtaining a mortgage was 26 percent.  Thernmedian downpayment for mortgaged vacation homes was 30 percent although 38rnpercent were all cash sales.  Distressedrnhomes continued to play a significant role in the non-owner occupied market,rnaccounting for 47 percent of investment sales and 42 percent of vacation homes.  </p

WhilernNAR said lifestyle factors were the primary motivation for vacation home buyersrnand rental income was driving investment purchases, the data also shows somernblurring of the lines.  Five percent ofrnvacation-home buyers reported they had already resold their property and whilern9 percent plan to do so within a year. Buyers plan to own their recreationalrnproperty for a median of 6 years, down from 10 years in 2012. </p

Yunrnsaid those figures “reflect the 28 percent of recreational property buyers whornsaid they purchased to diversify investments or saw a good investmentrnopportunity.”   Eighty-seven percent ofrnrecreational buyers did state an intent to use their property for vacations orrna family retreat and 31 percent say they will eventually use it as a primaryrnresidence; 23 percent intend to rent the property to others.</p

Forty-onernpercent of vacation homes purchased last year were in the South, 28 percent inrnthe West, 18 percent in the Northeast and 14 percent in the Midwest.  Sales of investment properties followed arnsimilar pattern with 38 percent purchased in the South, 25 percent in the West,rn18 percent in the Northeast and 19 percent in the Midwest. </p

Fiftyrnpercent of investment buyers said they purchased for rental income, 34 percentrnwanted to diversify their investments or saw a good investment opportunity, andrn22 percent bought for a family member, friend or relative to use.  Seven percent of investment homes purchased inrn2013 had already been resold by the time of the survey and another 10 percentrnwere planned for sale within a year. Overall, investment buyers plan to holdrnthe property for a median of 5 years, down from 8 years in 2012.</p

The typical vacation-home buyer was 43rnyears old, had a median household income of $85,600 and purchased a propertyrnthat was a median distance of 180 miles from his or her primary residence; 46rnpercent of vacation homes were within 100 miles and 34 percent were more thanrn500 miles. Investment-home buyers in 2013 had a median age of 42, earnedrn$111,400 and bought a home that was relatively close to their primary residencern- a median distance of 20 miles.</p

NARrnconducted its 2014 Investment and Vacation Home Buyers Survey in Marchrn2014 among buyers of about 2,203 homes purchased during 2013 from arnrepresentative panel of 2,008 U.S. households. The survey controlled for agernand income, based on information from the larger 2013 NAR Profile of HomernBuyers and Sellers, to limit any biases in the characteristics ofrnrespondents.  NAR’s analysis of U.S.rnCensus Bureau data shows there are 8.0 million vacation homes and 43.7 millionrninvestment units in the U.S., compared with 74.7 million owner-occupied homes.

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