2016 Investment and Vacation Home Buyers Outlook

Beach Homes Lake Homes Mountain Homes

Each year, the National Association of Realtors (NAR), publishes a survey on the second home market focused on vacation home sales and income home sales. The 2016 report, published this April highlights some informative trends for second home buyers.

When buying a vacation home, the report identified several reasons that stood out for people. These are important lifestyle considerations all second home buyers need to think about in order to make the best decisions – decisions that will determine their satisfaction once all is said and done. Thirty-seven percent of vacation home buyers plan to use their property for vacations or as a family retreat. For this group, special focus on the type of activities and environments your family enjoys together will point you to locations that provide this for you. Another 16% plan to convert this second home into their primary residence in the future. This is a great way to have a two-step plan towards downsizing and retiring in a vacation or resort style community. Interestingly, another 13% made the decision to buy a second home based on market conditions. In other words, they found a great deal. Sometimes, it’s that hidden gem that enables you to make the jump to second home life and often it’s only through relationships with a good buyers’ agent that you are able to find and buy these homes.

If an income or investment home is of more interest to you, 42% of people in this category plan to use the home to generate income. If you want to do this, it cannot be understated how important it is to find a property that is cash-flow positive. Investment home ownership can be very tricky if you do not earn more than your monthly mortgage and primary expenses, like property tax, and generate an income each month, even if it is just a small amount. Another 16% purchased because they found a good deal or believed the prices were low and presented a unique opportunity. A further 14% bought investment homes based on the potential for price appreciation and the opportunity to gain equity. Buying a home in the right location can lead to building substantial equity and improve your overall net worth over time if you buy in the right place.

Rising home prices. Vacation home prices jumped substantially from a 2014 average price of $152,000 all the way to $192,000 – a whopping 28% increase in one year. More than one third (36%) of these purchases were distressed properties, proving a large number of Americans continue to see opportunities to improve on a property and make it their own, while also delivering greater value for family, rental and equity purposes. Investment property average sale price increased by 15% to $143,500 continuing the trend that income properties tend to be more affordable than vacation homes. 

No money down.  Not for a vacation or investment home! Financially, second home buyers normally put considerable equity into their purchase. A full 39% of investors paid cash for their income properties. More than half (52%) of vacation home buyers who got a mortgage financed less than 70% of their purchase. Think about what you can afford and consider these when evaluating your home purchase. 

Gone to the beach! Not surprisingly, beach areas represent 40% of vacation home purchases proving Americans really do like long walks on the beach. The sunny vacation spots on the east coast, from Florida up through the Carolinas and all the way to New York continue to be favorite locations. The gulf coast of Texas and the west coast from California to Washington. Coming in second with 19% of vacation home sales each, was the purchase of mountain homes and lake homes. Mountain homes typically leverage winter resort areas that continue to expand their attraction in summer months with a range of activities and events. And lake homes in Minnesota, Wisconsin and Michigan, to name just a few are also very popular. Think about how you plan to enjoy your vacation home before committing to one of these areas. How frequently will you use it? How long does it take to get there? Vacation homes are typically located 200 miles from a primary residence although there is a share worth mentioning that is located more than 1,000 miles away from a primary residence.

Income is best generated in the city. Seventy percent of investment properties are in a suburb or in urban city settings. Both income and vacation homes typically are about 75% of the size of primary residence homes, averaging 1,600 and 1,500 square feet respectively. Also interesting to note, investment homes are typically purchased within 22 miles of an investors primary residence.  However, there is argument to be made for diversifying your investments beyond the market in which your primary residence is located. Investors frequently rely on real estate agents to manage their rentals. When choosing an agent for this purpose, consider finding an agent who is a certified property manager.

The sharing economy is trending and emerging businesses like Uber and AirBnB are likely great examples many of us are familiar with. Twenty four percent of vacation home buyers did or plan to rent out their home to guests for short term stays. Many vacation home owners utilize a property manager to help them generate income from their vacation home. Note that property managers can garner a substantial percentage of rental funds generated but they also take on all the marketing and administration of the process. 

It may be time for you to consider second home life.  A full 80% of people surveyed report that now is a good time for people to purchase real estate. And lastly, vacation home buyers and income home buyers are often the same group of people. Approximately one fifth of vacation home buyers plan to buy an investment home in the next two years and the trend remains true in reverse. Perhaps the best way to get that vacation home, is to start small with an income property in the city and parlay that cash flow and equity into a vacation property of your own.

No matter where you are today, this valuable information from NAR can help put your thoughts on second home life into greater context. And when you are ready to get into this market, Second Home Life can guide you to the best locations for you and connect you with a realtor who will best represent your needs.

The 2016 Investment and Vacation Home Buyers Survey can be ordered by calling 800-874-6500, or online at https://store.realtor.org/product/report/2016-nar-investment-and-vacation-home-buyers-survey?sku=E186-55-16. The report is free to NAR members and accredited media and costs $149.95 for non-members.

How did we get here?

Valerie and Tricia bring a unique combination of experience that led to the founding of Second Home Life.  They first met through their husbands, who were coworkers, when they went out for dinner at Talking Stick Resort in Scottsdale.  At the time it wasn’t clear how their skill set may come together in a future endeavor.  

“One of the funny things we learned was that we had both met our husbands through Match.com. So yes, we can confirm that on-line dating can really work,” laughed Valerie. Her background in market research, analytics and experience in innovation combined with her personal experience owning rental and vacation homes “matched” well with Tricia’s experience in real estate. “The thought occurred to us that we could help home buyers find locations that would enable them to purchase a vacation home or a rental property by matching people with locations similar to how on-line dating connects people who are likely to be compatible.” And that’s how Second Home Life began.

Since then, the task of gathering knowledge, expertise and information to build location profiles got underway. With the large amount of information and so many places people could choose to buy a second home, it has been an extensive effort. “The thought of doing all of this research, and providing it free of charge to potential home buyers was a little unnerving but we have been firm in our belief that we could help so many people achieve the goal of second home life by providing a better path to purchase. We couldn’t contain our excitement.”

Both Valerie and Tricia are passionate about helping people. From volunteering on non-profit boards to bringing their entire families out to volunteer at charitable initiatives, their focus on helping people is obvious in their everyday lives. “And in the real estate business, my most rewarding times have been working with buyers to help them find a home they never thought they would be able to find, and seeing the joy it brings to their family” says Tricia. “We are so excited to help people find a second home, one they can vacation with their family and friends, or generate passive income and build equity for retirement. We believe in the powerful ability to match profiles and that we will open a range of possibilities people may never have considered.” 

“Having a vacation home in the mountains has brought another measure of enjoyment for our family,” says Valerie. “I really had no idea how much it would provide for relief of stress, fun and games, outdoor activities, and unique experiences that to me are so valuable – I just want to help other families do this too – it’s so great! Another bonus is that we’ve also been able to share our space with others, reduce our cost of ownership, by renting it to others.”

The emergence of the sharing economy in real estate through companies like AirBnB open up a whole new range of possibilities for people to get into this market. More than one third of vacation home owners are planning to or have rented their homes to others. This is a way in which people can more easily afford a vacation home by offsetting the cost of their mortgage by renting it out when not in use.  And AirBnB makes it easier than you might think.  

“We truly hope home buyers will leverage our path to purchase and build a profile to help them find options that exceed their wildest dreams, rather than spending hours browsing through listings without really having a good process that enables them to achieve their dreams of second home ownership,” says Tricia. “it’s a lifestyle and financial achievement many people aspire to and we can help more people achieve it in a way that works for them.”