The combination of vacation- and investment-home sales slipped to 30 percent of all existing- and new-home transactions in 2008, compared to 33 percent in 2007 and a much larger 40 percent in 2005, the peak year for home speculation, according to the National Association of Realtors. NAR’s 2008 Investment and Vacation Home Buyers Survey released Tuesday reported total 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. The second-home market is really driven by the availability of debt, said Daniel Alpert, managing director of Westwood Capital LLC. "Given the absence of mortgage money for primary homes, one can imagine that there's no mortgage money for vacation homes," he told the Boston Globe. However, for those buyers who did invest in a second home in 2008, more than four out of 10 investment buyers and more than three in 10 vacation-home buyers paid cash for their properties, according to NAR, with large percentages indicating that portfolio diversification was a factor in their purchase decision. 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. “As in the market for primary residences, it appears that many sales of deeply discounted distressed homes are pulling down the median price in the second-home market as well,” said Lawrence Yun, NAR chief economist. Yun said lifestyle considerations are the single most important factor in the vacation home market. “People are buying weekend homes or recreational property to use themselves or for a family retreat – investment considerations are secondary for most vacation-home buyers with relatively modest interest in renting.” 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, according to NAR's findings. Investment-home buyers in 2008 had a median age of 47, earned $85,000, and bought a home that was fairly close to their primary residence – a median distance of 19 miles. When asked about the most important reasons for purchasing an investment home, the majority said to provide rental income. According to the survey, Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 71 percent of primary residence buyers. “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,” Yun said. And he expects that steady share of sales to continue. “While economic factors can affect sales from one year to the next, the fundamental demand from these large population groups will remain,” Yun said. “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.” Interestingly, the size of the second-home market is quite significant in the United States. NAR’s analysis of U.S. Census Bureau data shows there are 8.1 million vacation homes and 40.5 million investment units in the United States, compared with 75.5 million owner-occupied homes. Write to Kelly Curran at kelly.curran@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.