Growing demand, limited inventory and a strong stock market all helped Americans rekindle their love of second homes in 2012 as sales surged.
According to the 2013 Investment and Vacation Home Buyers Survey from the National Association of Realtors, the market for vacation home sales in 2012 was more than 10 percent higher than in the previous year.
“We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes,” said NAR Chief Economist Lawrence Yun. “Attractively priced recreation property is also a big draw.”
Some 11 percent of all home transactions in 2012 were for vacation properties, according to NAR data. Moreover, 78 percent of all second-home buyers reported that it was a good time to buy, compared to 68 percent of primary residence buyers.
“This suggests that second-home buyers tend to be a step ahead of general buyers in sensing a market recovery,” Yun said.
The typical buyer was 47 years old (younger than previous years, but older than average home buyers), had a median household income of $92,000 (20 percent higher than conventional primary residence buyers) and purchased property a median distance of 435 miles away from the primary residence.
About 34 percent of vacation homes purchased last year were within 100 miles of the buyer’s primary residence, while 46 percent were more than 500 miles away. Of the homes purchased, 36 percent were in the American South, 28 percent in the West, 20 percent in the Northeast and 16 percent in the Midwest.
The number of vacation homes sold last year jumped from just over 500,000 to 553,000, despite higher median sales prices for the first time since 2009. Average prices rose from $121,300 in 2011 to $150,000 in 2012, but were still well below a pre-bubble high in 2005, when the median price for a vacation home was $204,100.
"Although vacation homes prices are starting to rise, the cost is still incredibly affordable compared with prices 10 years ago," said Brian Sharples, chief executive officer of HomeAway, which sponsored a portion of the survey. "At the same time, the interest in vacation rentals by travelers in the United States remains strong, and the speed and ease with which owners can list and rent a home online has never been more favorable."
The NAR survey showed that 38 percent of vacation home buyers purchased a vacation property in 2012 largely due to low real estate prices, while 28 percent cited a desire for a family retreat.
Nearly eight in 10 buyers said rental income influenced their decision to buy last year, highlighting the rising trend of vacation owners placing their properties on sites like Airbnb, Flipkey and HomeAway.
Almost all vacation home buyers (92 percent) said they plan to rent their property within the next 12 months to either long-term or short-term renters or a combination of the two. Nearly two-thirds of those surveyed by NAR thought they could make enough rental income to cover at least half of their mortgage.
While the situation may look rosy at the moment, after two years of surging demand and price increases, Yun warns that the vacation house market could hit a wall.
“With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years.”