According to the National Association of Realtors (NAR), although the combined total of vacation- and investment-home sales declined with the overall market in 2007, it still accounted for 33% of all home sales, which is close to historical norms.
NAR’s annual Investment and Vacation Home Buyers Survey shows that vacation-home sales dropped 30.6% to 740,000 in 2007 from a record 1.07 million in 2006, while investment-home sales fell 18.1% to 1.35 million last year from 1.65 million in 2006. At the same time, primary-residence sales dropped 10% to 4.34 million in 2007 from 4.82 million in 2006.
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The overall sales decline in 2007 is due to a combination of factors. “Certainly, second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” said NAR chief economist Lawrence Yun in a press release. “The other factor is the disruption in the mortgage market, with a significant tightening of credit during the second half of 2007.”
Yun said that lifestyle factors and strong demographics remain positive for the vacation-home market: “Investment considerations are secondary for vacation-home buyers, so there is some dormant underlying demand. A peak of population is moving through the prime years for buying recreational property.”
The median price of a vacation home was $195,000 in 2007, down 2.5% from $200,000 in 2006. Fifty-nine percent of vacation homes purchased in 2007 were detached single-family houses, 29% were condos, 7% were townhouses or row houses, and 5% were other dwelling types. In 2006, single-family homes accounted for 67% of vacation home sales, while condos accounted for 21%.
Who, What, Where
The typical vacation-home buyer in 2007 was 46 years old with a median household income of $99,100 and purchased a property that was a median of 287 miles from their primary residence.
In listing the reasons for purchasing a vacation home, 84% of survey respondents said they wanted to use the home as a vacation or family retreat; 30% as a primary residence in the future; 26% to diversify investments; 25% to rent to others; 16% for the tax benefits; 14% for use by a family member, friend, or relative; and 6% because they had extra money to spend.
Last year, 41% of vacation homes were purchased in the South, 24% in the West, 19% in the Northeast, and 16% in the Midwest. In terms of location, 30% of vacation homes were purchased in rural areas, 20% in resorts, 20% in a suburb, and 14% in an urban area or central city.
NAR’s 2007 Investment and Vacation Home Buyers Survey, conducted in March 2008, can be ordered by calling 800.874.6500, or visiting www.realtor.org. The cost is $50 for NAR members and $125 for nonmembers.