3 Keys to Buying a Vacation Home
NEW YORK (MainStreet) Are you wasting your weekends? With your crazy schedule, it's just too hard to plan ahead, and last-minute getaways can be expensive disappointments. The best retreats are booked, and the leftovers leave a lot to be desired. It seems more and more Americans are solving their diversion dilemma by snagging a vacation home bargain. Excluding institutional investments, vacation home sales rose nearly 30% last year to an estimated 717,000, up from 553,000 in 2012, according to the National Association of Realtors (NAR).
"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 says. "However, vacation-home sales are still about one-third below the peak activity seen in 2006."
The NAR reports the median vacation home price was $168,700, a nice number but up 12.5% from $150,000 in 2012.
There report indicates there are some key similarities among successful vacation home buyers:
- Cash purchases are common, as 38% of buyers scored their getaway homes in an all-cash transaction.
- Of the buyers who financed their purchase with a mortgage, large down payments are typical. The median down payment for vacation home buyers was 30%.
- And perhaps the biggest inside edge for vacation home buyers: 42% of the homes purchased last year were distressed houses either in foreclosure or purchased in a short sale.
NAR says the typical vacation home buyer last year 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. Nearly half (46%) of vacation homes were within 100 miles and 34% were more than 500 miles. Buyers also reported planning to own their recreational property for a median of 6 years, down from 10 years in 2012.
Respondents to the survey listed many reasons for purchasing a vacation home: 87% want to use the property for vacations or as a family retreat, 31% plan to use it as a primary residence in the future, 28% wanted to diversify their investments or saw a good investment opportunity, 23% plan to rent to others and 22% intend it for use by a family member, friend or relative.
A few (5%) of vacation-home buyers in 2013 had already resold their property by March of this year, while another 9% plan to sell within a year. "This reflects the 28% of recreational property buyers who said they purchased to diversify investments or saw a good investment opportunity," Yun says.
Most (41%) of vacation homes purchased last year were in the South, 28% were Western retreats, 18% were in the Northeast and 14% in the Midwest. NAR's analysis of U.S. Census Bureau data shows there are 8 million vacation homes in the U.S., compared with nearly 75 million owner-occupied homes.
--Written by Hal M. Bundrick for MainStreet