The Vacation Home Market is Back in Business
By Sara Goldman,
Sara Goldman On
4/2/2014 6:19:47 PM
The vacation home market is once again buzzing with buyers and it hasn't been like this since more than seven years ago. Comprising 13 percent of overall home sales activity in 2013, vacation home sales obtained their largest market share since 2006.
In a recent National Association of Realtors Investment and Vacation Home Buyers Survey, vacation home sales rose 29.7 per cent from 553,000 in 2012 to 717,000 in 2013.
Lawrence Yun, Chief Economist at NAR, said that high networth households benefited from growth in the equity markets. This provided the springboard for empowerment and sufficient audacity to acquire recreational property. Vacation home sales are still one-third beneath 2006 peak levels.
2013 may have seen a rise in the percentage of vacation home purchases, but the same year also saw the downfall of investment home rate of investment homes dropped to around 1.1 million from 1.21 million the previous year. Overall decline of investment homes purchased was at 8.5 per cent.
The slowdown of investment activity is by no means difficult to comprehend, according to Yun. Because of quick-rising prices and a decrease in discounted foreclosures activity throughout the year, investor purchasing started to drop in 2013.
Yun added that in 2011 and 2012, home prices were defined by over correction when the downturn struck several points and generated bargains that could be converted to rentals and profits. Investors have to be more careful about their purchases and conduct a thorough market research once market conditions return to normal.
Representing a 13 percent surge, the median price of investment home increased from $115,000 in 2012 to $130,000 in 2013.
Buyers were far from discouraged even when median vacation home price shoot up from $150,000 in 2012 to $168,700 in 2013, an increase of 12.5 percent.
Cash purchases likewise took a turn for the better with 38 percent of vacation homebuyers and 46 per cent of investment buyers paying cash in 2013.
2013 was also a year for buyers who made large down payments but utilized mortgage to fund their purchase. Median down payment for investment buyers was at 26 per cent and 30 per cent for vacation home buyers.
Vacation homebuyers were typically in their 40s with a median household income of $85,600. Their preferred property location had a median distance of 180 miles from their main residence. 46 percent of vacation homes were within a hundred mile radius with 34 percent situated 500 miles away. Ownership plans for recreational properties were around 6 years. In 2012, buyers were more optimistic about owning recreational property for 10 years.
Last year, typical investment homebuyers had a median age of 42 with an income of $111,400 and purchased homes at a median distance of 20 miles from their primary residence.
The southern U.S. territory was a real estate hot spot for both investment and vacation homebuyers. Vacation homes purchased in 2013 were South-bound (41 per cent). The West (28 percent), Northeast (18 percent) and Midwest (14 percent) followed suit.
Investment properties were mostly purchased in the South, accounting for 38 percent. 25 percent of investment buyers preferred the West while the rest would rather invest in the Northeast or the Midwest.
Snoqualmie Pass Real Estate, Mortgage, and Economy