The real estate market continues on through the first quarter of 2014 and into the second, and as we near the mid-way point of the year, we know that real estate has come a long way from the doldrums of the recession. Across all segments, prices are up and activity has increased across the nation. From single-family homes as primary residences to homes picked up as secondary properties, people are not only becoming more interested in real estate, but are also becoming more able to buy – resulting in a renaissance of sorts. One area in particular that has gotten hot is the realm of vacation properties.
Vacation Property Purchases Rise
In 2013, buyers bought more vacation homes than they did in 2012 – at a 30 percent faster rate. Meanwhile, investment property purchases fell by 8.5 percent, according to the National Association of Realtors. Furthermore, fully 13 percent of all home transactions in the United States were vacation homes. This is the highest percentage of total transactions as vacation homes since 2006, before the crash. Investment sales share fell to 20 percent from 24 percent in 2013. Why are vacation home properties on the rise? One theory is that households with high net worth have benefited from the stock market’s resurgence, which gives them more disposable income with which to purchase high-value items. And since vacationing is always in demand, these households have decided to purchase recreational property, or property that can be used for vacationing and getaways.
More Buyers Paying in Cash
Many of these homes are being purchased with cash, too, especially in Florida, a state in which cash reigns supreme. Across the state, reports indicate that buyers paid in cash for homes 64 percent of the time, which is almost twice the percentage from a year ago. The trend for cash purchases isn’t surprising. Investors got into the cash game early in the recession when they took advantage of plummeting prices and widespread foreclosures to pick up distressed properties. Now, though, that level of activity has subsided, in favor of households that have saved and can now make cash purchases with confidence.
Prices for Vacation Homes Rise
Rising home prices are the norm now across the nation, but that is particularly true for vacation properties. The median price for a vacation home in the country was $168,700, which rose 12.5 percent year-over-year. For an investment property, it was $130,000, which was an even bigger increase, at 13 percent year-over-year.
Median Buyer Information and Activity
Who, exactly, is buying vacation homes? The typical buyer was 43 years old and had a median household income of $85,600. This buyer also purchased a vacation home roughly 180 miles from their main residence, on average. Approximately a third of all vacation home purchases were 500 miles from a primary residence, and the most popular region for vacation home purchases was the South. This is not surprising; the South has long been one of the primary destinations for vacation homes, at least for those who live east of the Mississippi. For those out west, the Pacific Coast is a prime destination, along with interior destinations like Colorado.
Florida has long been one of the most popular destinations for vacation home buyers, and Southwest Florida in particular has benefited from the influx of people looking for ideal places to vacation and get away from it all. Buyers surveyed said they plan on keeping their vacation home for a median of six years, which was actually down from 10 years in 2012. This may be a testament to rising prices and the allure of selling a property for a sizable profit. Most buyers said they made the purchase for vacation purposes; 30 percent said they planned on living in the homes as primary residences at some point in the future; and close to 30 percent said they purchased it to diversify their investments. Others planned on renting out the home or letting others use the home for vacations. As the real estate market continues to improve, Southwest Florida can expect more interest in vacation home purchases. The percentage of purchases use for recreational purposes should continue to rise as household incomes in the area increase. Since most of these homes are purchased in cash, rising interest rates shouldn’t have as big an impact on sales as they will on the housing market in general. One thing is certain: Southwest Florida will remain a highly desirable destination for vacations, as well as a center of strong real estate.