With summer upon us I figured it was time to take a look at vacation property. Despite all those time share pitches, this is still a sliver of the overall housing market, just 9% last year, down from 12% in 2007.
The National Association of Realtors says vacation-home sales dropped 30.8 percent to 512,000 last year from 740,000 in 2007. That’s much steeper than the decline primary residences, which fell 13.2 percent to 3.77 million in 2008 from 4.34 million in 2007.
The median price of a vacation home was $150,000 in 2008, down 23.1 percent from $195,000 in 2007. Surprisingly, two out of every five vacation home buyers pays cash.
Despite weakening second home purchases in 2008, the long-term demand looks favorable. Currently, 39.2 million people in the United States are ages 50 to 59 – a group that dominated vacation sales in the first part of this decade. An additional 44.8 million people are between 40 and 49, and another 40.7 million are 30 to 39.
“Given that most people become interested in buying a second home in their 40s, the bulge of population approaching middle age should drive the second-home market over the next decade,” explains Lawrence Yun, the Realtor’s chief economist.
The typical vacation-home buyer in 2008 was 46 years old, had a median household income of $97,200, and purchased a property that was a median of 316 miles from their primary residence; 35 percent were within 100 miles and 36 percent were 500 miles or more.
When asked about their reasons for purchasing a vacation home, 89 percent of buyers wanted to use the home for vacation or as a family retreat; 27 percent to diversify investments; 27 percent to rent to others; 26 percent to use as a primary residence in the future; and 17 percent for use by a family member, friend or relative.
In terms of location, 26 percent of vacation homes were purchased in small towns, 23 percent in a rural area, 23 percent in resorts, 20 percent in a suburb, and 8 percent in an urban area or central city.
Seventy percent of vacation homes purchased in 2008 were detached single-family homes, 18 percent condos, 5 percent townhouses or rowhouses, and 7 percent other.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.