RISMEDIA, April 4, 2009-You’d love to buy a vacation home, but (let’s be honest) the recession and the not-so-dim memory of the housing bubble have you a bit skittish. If only you could see what the future holds. But since a reliable crystal ball has yet to be invented, you must resort to less mystical indicators.
According to Christine Karpinski, the National Association of Realtors® (NAR) 2009 Investment and Vacation Home Buyers Survey suggests that the iron is sizzling hot-and if you’re going to strike, the time is now.
“A few years ago when prices were escalating rapidly, people were kicking themselves for not having bought earlier when real estate was far more reasonable,” notes Karpinski, director of Owner Community for HomeAway.com and author of How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment. “Well, in 2012 or so, people will look back on 2009 as another missed opportunity.”
While all home sales were down significantly in 2008 (as one would expect)-and vacation property sales were down some 30%-so were real estate prices. That, of course, makes for an extremely favorable buyer’s market. It’s not surprising at all, therefore, that the NAR report found that 80% of vacation property and investment property owners surveyed believe that now is a great time to purchase real estate.
These sentiments echo those of Walter Molony, spokesman for NAR, who said in a recent CNBC article that the second home market is “fundamentally healthy.”
“The long-term underlying demand is favorable for vacation homes because of the large number of middle-age, middle income Americans [who are the primary buyers of such properties],” Molony was quoted as saying. “In recent years, this market has been driven by the Baby Boomers, but there are two even larger population groups coming up right behind them. Those younger segments will continue to fuel this market for the next 10 years.”
Karpinski says the NAR 2009 survey results, in conjunction with a proprietary Special Report done for HomeAway, constitute clear evidence that now is an ideal time to buy a vacation home.
She offers the following insights:
– Home prices are way, way down. The National Association of Realtors survey showed that the median sales price of the typical vacation home was $150,000-down 23.1% from 2007’s median price of $195,000. (To put this in perspective, consider that when NAR started conducting this survey, the median vacation home price in 2003 was $190,000 and reached a high in 2004 of $204,100.) When combined with the rock bottom interest rates, says Karpinski, all signs point to the likelihood that we’re now at the picture perfect time to buy.
“Anecdotally, I can tell you that people who would never have purchased a detached single home on the coast are now seriously considering it,” she notes. “Homes that would have once cost $3 million have now fallen to $1.5 million. And these buyers know that the price won’t stay down long, and will never be this low again.”
– It’s never been more obvious that real estate is a sound long-term investment. The NAR survey results revealed that the share of speculator sales is down from 29% to 16%. Combined with the fact that 34% of buyers are purchasing properties within 100 miles or less of their primary residence-which suggests they intend to use it themselves-this trend indicates that more and more people are embracing a “buy and hold” strategy. Plus, Karpinski says she constantly sees evidence that people are beginning to see the long-term benefits of real estate investing earlier in life. (The median age of vacation property buyers in 2008 was a relatively young 47.)
– The vacation home rental market is booming. While 89% of vacation property owners surveyed cited “to use for vacations or as a family retreat” as a reason for purchasing their second place answer is telling, indeed. Twenty-seven percent of respondents said they were purchasing their home “to rent to others.” While this number is up from the 25% cited in last year’s survey, Karpinski predicts next year’s survey will really tell the tale. As recession-crunched homeowners pursue new income streams-and as it becomes ever more evident that the vacation rental market is booming-2009 will prove to be a huge turning point in the renting out of second homes.
– People are more in touch with “rental realities” than they once were. In the past, says Karpinski, a first-time vacation homeowner might have expected to rent out their property an unrealistic number of weeks (say, 50 weeks out of the year). But NAR’s Special Report for HomeAway shows that 44% of respondents said they plan to rent anywhere between 9-26 weeks.
– Renting by owner has become mainstream. The NAR Special Report for HomeAway reveals that 54% of respondents plan to market their homes themselves. This do-it-yourself attitude reflects not only a burgeoning confidence index among vacation property owners, but also the wealth of support resources available to those who want to rent out their homes themselves.
Everything has changed. The truth is it’s gotten so easy and so affordable that there’s no valid reason not to do it yourself.” Need one more reason to take the plunge? Consider the fact that last month Fannie Mae rescinded its four-property limit for investors. If you’re financially secure and can come up with the requisite 20% down, chances are good you’re going to easily qualify for a mortgage.
“Of course there are always risks when buying any kind of real estate,” Karpinski acknowledges. “But investors who are comfortable with risk have to realize that conditions are ripe right now for a ‘perfect storm’ of success. Even if housing prices do go lower, interest rates surely will not. And once the turnaround comes, selection won’t be nearly as good as it is right now.
“Naturally, you should be cautious and do your homework before you buy any property-but don’t be so cautious that you miss this window of opportunity,” Karpinski adds. “These windows do have a way of slamming shut, and you don’t want to be stuck on the other side wistfully looking in a few years down the road.”
Christine Karpinski is the author of How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment andProfit from Your Vacation Home Dream: The Complete Guide to a Savvy Financial and Emotional Investment.