Vacation Home Sales on the Rise

By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

More Americans took advantage of housing market conditions in 2012 to snap up vacation homes – a good sign of confidence in both the market and the economy overall.

The vacation home market follows the same highs and lows as the residential home market. This segment faded out during the recession, but a new survey out from the National Association of Realtors shows strength once again in this sector.

Sales of vacation homes (both new and existing) climbed 10.1% to 553,000 last year from 502,000 in 2011. Meanwhile, investment home sales declined 2.1% to 1.21 million from 1.23 million the previous year. Vacation homes are purchased mainly for the owner’s use, whereas investment homes are used mainly as rentals.

Median prices of vacation homes also increased to $150,000 in 2012, up from $121,300 in 2011. The Realtor group attributed the increase to increased sales of more expensive properties.

I called upon a good friend of mine, Peter Sobrero, who has spent his entire career selling some of the most prestigious luxury homes throughout the Unites States and World to get his thoughts on the status of vacation homes.  Peter says, “We are seeing strong purchasing in the luxury destination markets within the U.S., and within close proximity.  I hear from many of clients that they are tired of waiting, the pricing is right, and they and their kids and grandkids are not getting younger.  This affluent sector has the cash stores and want what they want, it seems we are seeing the willingness now to take action.”

The vacation home market is interesting to watch because although it tends to follow the residential housing market as a whole, it’s driven by somewhat different factors. NAR points out that all-cash purchases remain common, with 46% of vacation home buyers purchasing this way. And of buyers who financed their purchase, large down payments (a median of 27%) remain common.

There’s no doubt that attractive prices were a big draw for many buyers of vacation homes in 2012.

In the investment home market, which is mostly rental driven, the median price was $115,000 in 2012, up 15% from $100,000 in 2011. Investment buyers for the most part bought a home that was relatively close to their primary residence, a median of 21 miles.

Property flipping increased modestly, though NAR said that flipping this time around is not the same as it was during the height of the housing boom. Rather, investors are making real improvements to their properties before reselling them. In fact, 6% of the homes purchased in 2012 by investment buyers have already been sold, and another 8% plan to sell in the next year.

If you’re in the market for a vacation or investment home or have clients who are thinking about this, the survey is an interesting gauge. But it’s also useful as we assess the overall health of the housing recovery across the U.S.