Vacation Home Sales Slipping in Downturn, But Long-Term Forecast Still Positive

By Anuradha Kher, Online News EditorWashington D.C.–The combination of vacation- and investment-home sales slipped to 30 percent of all existing- and new-home transactions in 2008, according to the National Association of Realtors (NAR). However, more than four out of 10 investment buyers and more than three in 10 vacation-home buyers paid cash for their properties.“Yes, it’s a vacation home but it is also an investment,” Rob Käll, president and co-founder of Bookt, tells MHN. Bookt creates the “back-end engines” and online tools for property management companies and property owners to connect them with vacationers around the globe. “Maybe not two years from now, but 10 years from now, they will be able to get some revenue out of the property and that’s why they are paying in cash.”NAR’s 2008 Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.8 percent to 512,000 last year from 740,000 in 2007, while investment-home sales fell 17.2 percent to 1.12 million in 2008 from 1.35 million in 2007. Primary residence sales declined 13.2 percent to 3.77 million in 2008 from 4.34 million in 2007.Lawrence Yun, NAR chief economist, says the findings are understandable given the economic backdrop. “We expected vacation-home sales to fall given the impact of a declining economy on discretionary purchases,” he says. “A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas, with a smaller portion of new homes in the sales mix.” Despite weakening second home purchases in 2008, the long-term demand looks favorable because there are large numbers of people in the prime years for buying a second home. Currently, 39.2 million people in the United States are ages 50 to 59—a group that dominated 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. “The general demographic trend of people buying secondary homes is interrupted by the economic downturn, but the baby boomers have money and they still want to invest, which indicates that the long-term demand for this product is good,” says Käll. The median price of a vacation home was $150,000 in 2008, down 23.1 percent from $195,000 in 2007. The typical investment property cost $108,000 last year, which is 28.0 percent below the 2007 median of $150,000. 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 rent; 27 percent to diversify investments; 26 percent to use as a primary residence in the future; and 17 percent for use by a family member, friend or relative. “Consumers are becoming more price conscious and demand is softening,” says Käll. “Properties are not as saleable as they used to be and they won’t regain all of their lost value so property owners are looking to make some income through their secondary homes, which is why a greater number of people are renting them.”