Vacation Home Sales Taper Off as Prices Rise
By Clare Trapasso | Photo by Roderick Eime
It’s hard enough these days just to scrape together the cash to buy a house to live in. (Just ask many frustrated wannabe buyers.) So it’s not surprising that fewer people can manage to purchase a vacation home as well.
Sales of holiday homes slowed last year as prices of those dream getaways soared, according to a recent National Association of Realtors® report. They fell 18.5% to 920,000 purchases in 2015, compared with the previous year’s peak of 1.3 million.
Meanwhile, the price tags of those second homes shot up a whopping 28%, to $192,000, in 2015, according to the report.
The association surveyed more than 2,000 buyers of residential homes in 2015 for the survey, which was conducted in March.
“The decline in sales of vacation homes … is because of the substantial increases in prices,” says Jonathan Smoke, chief economist of realtor.com®.
“Since we saw a broad decline in the stock market in the fall, that would [also] have caused many would-be buyers to stay on the sidelines,” he continues. And “if it’s difficult to get a mortgage to live in a home, it’s even more difficult to get a mortgage on a part-time [getaway] property.”
The median household income of vacation home owners was $103,700 in 2015—up from $94,380 in 2014.
More than half, 58%, picked up single-family getaways instead of condos (25%) or townhouses (13%), according to the report. Vacation home sales made up 16% of the market.
The most popular getaways were in the South—particularly sunny Florida. About 47% of vacation homes were below the Mason-Dixon Line, while 25% were out West, 15% were in the Northeast, and 13% were in the Midwest.
“The South rebound clearly has a lot to do with Florida,” Smoke says. “Florida is one of the last states to start to recover from the housing bust, so the prices are still relatively attractive and beneath their peak levels.”
Prices shot up in Sarasota, FL, last year as anxious buyers flooded the market, says local real estate agent Linda Starcher of Re/Max Alliance Group.
“There were so few properties to choose from that it made people nervous,” she says. “Demand was fueled by an artificial belief you had to get in before the prices got too high and there was nothing left.”
But it’s begun leveling off because of the weak Canadian dollar, discouraging buyers from way up north. The turbulent stock market also “caused the baby boomers some concern,” she says.
The median price in Sarasota is about $252,000, both for the ever-popular condos as well as single-family homes, she says.
Much of the local market is dominated by “snowbirds” over the age of 50 who head south to the beach city when the weather gets cold up north, Starcher says. They’re typically not in any big hurry to buy and can afford to sit on the sidelines until the markets—and their bank account balances—improve.
They usually use their home away from home whenever they get a little time off from work, she says. But as the years go on, and they edge closer toward retirement, they begin spending more and more time in the Sunshine State. Eventually, many owners will make the coastal city their primary address.
About 40% of those seeking a (hopefully) well-earned break scooped up homes near a beach last year, according to the report. (Yes, please!) Nineteen percent got residences in the mountains or near a lakefront, while 16% decided to go for the country.
Not everyone bought extra homes to get away from it all. Investment properties sold to smaller investors shot up 7%, to 1.09 million homes, in 2015, according to the report. These sales made up 19% of all home purchases last year.
Prices also surged 15.3% year over year on these money-making abodes, to a median price of $143,500.
Often, these are residences that owners will rent out to tenants or those visiting from out of town. But these don’t include the investment properties bought by financial institutions, which have been declining, says realtor.com’s Smoke.
Many investors hope to profit off the booming rental market—a result of high home prices and tight credit preventing many from buying their own personal palaces.
Buyers of these properties were predominantly local, living just 22 miles from their properties, according to the report. They had a median household income of $95,800.
“Steadily increasing home prices and strong rental demand appear to be giving more individual investors assurance that purchasing real estate will diversify their portfolios and generate additional income,” Lawrence Yun, the National Association of Realtor’s chief economist, said in a statement.
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