Buying a Vacation Home in a Down Market: The Pros and Cons

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Real estate agents in several resort areas suggest that the time is right to purchase a vacation home because of a larger inventory and favorable prices. A survey shows second-home buyers agree. The National Association of Realtors’ (NAR) annual Investment and Vacation Real estate agents in several resort areas suggest that the time is right to purchase a vacation home. Home Buyers Survey, conducted in March 2008, found that eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 59 percent of primary-residence buyers. Forty-four percent of vacation home buyers said they were likely to purchase another property within two years. Pent-up demand that drove vacation home sales to a new record in 2006 did decline with the overall 2007 housing market. NAR chief economist Lawrence Yun says part of the reason is that investment considerations are secondary for vacation home buyers, so there is some dormant underlying demand. A peak of population is moving through the prime years for buying recreational property. “Certainly, second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” says Yun. The other factor is the disruption in the mortgage market, with a significant tightening of credit during the second half of 2007. Upsides of the Market If considering a vacation home purchase, investigate each area’s unique sales-purchases profile. Nancy Gale of Town & Country Associates in Barre, Vt., says there has been a modest lessening of prices there but nothing dramatic. “People that come here are cash buyers and a purchase may be one of several vacation homes,” Gales says. She says many vacation homes in her area are sold to out-of-state buyers who buy and raze older residences, called camps, and build new or buy existing homes, typically lakefront properties. In Virginia Beach, Va., Dorcas T. Helfant-Browning of Coldwell Banker Professional says it’s a good time to buy in this long-time resort area, which she says is in a little better position than much of the country. “The fundamentals are good,” Helfant-Browning says. “Interest rates are wonderful. Our area continues to grow.” Someone seeking a vacation home there will find that the price increases have slowed since the mad rush from 2005 to about a three percent growth rate. There is also a decent inventory of vacation homes which, in that area, are lifestyle choices. They are not necessarily the detached single-family homes but, for example, condos on the water. The market has an international feel and Canadians, for one, like the area, appreciating the proximity of a southern getaway that is a day and a half shorter drive than Florida. In other areas, such as Arizona, Florida, Nevada and California, mortgage delinquencies have dropped prices and may offer different opportunities. In a press release, the Greater Las Vegas Association of Realtors® noted that the February price decrease for single-family homes there came because 41.5 percent were bank-owned houses being sold at reduced prices. While buyers cannot expect similar prices for all homes, GLVAR President Patty Kelley says some homes were selling for less than what it would cost to build them today. On the Gulf Coast of Florida, Baby Boomers and foreign buyers are taking advantage of the price drop to purchase vacation homes, says Pam Civitillo, real estate agent with Joshua C. Johnson Real Estate in Englewood, Fla. “Prices

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