Buyers are back in the vacation home market at a rate not seen since 2006. Vacation home sales accounted for 13% of all home sales transactions last year, their highest market share since 2006.
Vacation home sales jumped 29.7% to an estimated 717,000 in 2013, up from 553,000 in 2012, according to the National Association of Realtors 2014 Investment and Vacation Home Buyers Survey.
“Growth in the equity markets has greatly benefited high net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,” NAR Chief Economist Lawrence Yun said. “However, vacation-home sales are still about one-third below the peak activity seen in 2006.”
While the rate of vacation home purchases was on the rise in 2013, the rate of investment homes fell 8.5% to an estimated 1.1 million in 2013. That’s down from the 1.21 million investment homes purchased in 2012.
Yun said the pullback in investment activity is understandable. “Investment buyers slowed their purchasing in 2013 because prices were rising quickly along with a declining availability of discounted foreclosures over the course of the year,” he said.
“In 2011 and 2012, investment property was a no-brainer because home prices had sharply over corrected during the downturn in many areas, creating great bargains that could be quickly turned into profitable rentals,” Yun added. “With a return to more normal market conditions, investors now have to evaluate their purchases more carefully and do their homework.”
The median price of investment homes rose to $130,000 in 2013. That represents a 13% increase over the 2012 median price of $115,000.
Vacation home prices were up too, but that didn’t keep buyers away. The median vacation home price was $168,700, up 12.5% from $150,000 in 2012.
All cash purchases continued to be commonplace in the investment and vacation market. 46% of investment buyers paid cash in 2013, as did 38% of vacation homebuyers.
Of buyers who financed their purchase with a mortgage, large down payments continued to be the norm in 2013. The median down payment for investment buyers was 26%, while vacation homebuyers typically put 30% down.
The typical vacation homebuyer was 43 years old, had a median household income of $85,600 and purchased a property that was a median distance of 180 miles from his or her primary residence; 46% of vacation homes were within 100 miles and 34% were more than 500 miles away. Buyers plan to own their recreational property for a median of 6 years, down from 10 years in 2012.
Investment homebuyers in 2013 had a median age of 42, earned $111,400 and bought a home that was relatively close to their primary residence, a median distance of 20 miles.
Both investment homebuyers and vacation homebuyers gravitated more towards the southern part of the U.S. for their purchase. 41% of the vacation homes purchased last year were in the South, 28% in the West, 18% in the Northeast and 14% in the Midwest.
Those figures were similar in the investment market as well. 38% of investment properties purchased last year were in the South, 25% in the West, 18% in the Northeast and 19% in the Midwest.