Time to make vacation retreat a reality?
Lately, more people are wondering if the market is ripe for turning the dream of owning a vacation retreat into a reality.
Prices on vacation homes have fallen even more sharply than on primary homes. Last year alone, the median price of a vacation home fell 11%, while the price of a typical primary residence fell 5%, according to the National Association of Realtors’ annual Investment and Vacation Home Buyers Survey, which includes information from about 1,900 buyers.
In some cases, people are scooping up cabins in the woods for less than $100,000, said Charlie Young, president and chief executive of ERA Real Estate, a residential real-estate brokerage franchiser. Even some individuals who rent their primary residences are looking to buy a vacation property in a more affordable market, Young said.
But unlike a primary residence, a vacation home is a discretionary purchase, and in times of financial uncertainty, people are reluctant to shell out unnecessary funds.
Buying for now, and later
Some baby boomers are seizing an opportunity to get a deal on a vacation home they can enjoy now but that’s also a home that eventually will become their primary residence when they retire. Some baby-boomers are selling their ‘big house’ and buying a smaller home or condo - and, using the excess equity to purchase a second home.
According to the National Association of Realtors’ survey, 34% of people who purchased a vacation home in 2010 plan on using that property as a primary residence at some point in the future.
For those who already are maxing out contributions to their retirement plans, the idea of buying a vacation home with their extra cash holds appeal.
Stock market ‘iffy’… real estate at (or near) bottom
“A lot of people are worried about the [stock] market today because of the volatility and the fact we could be going into a double-dip recession. They’re looking for other avenues. Real estate, if we’re not at the bottom [in prices], people think we’re pretty darn close,” comments Dan White, president of Daniel A. White & Associates, a wealth-management firm in the Philadelphia area.
Renting it out
Another consideration: Will you rent out the house when the family isn’t using it? To go that route, you must be comfortable with the idea of strangers sleeping in your home.
Many people who own vacation homes end up renting them out at least some of the time. It’s not a surprise, considering that 48% of vacation-homeowners are able to cover 75% of their mortgage from renting to travelers, according to HomeAway, an online marketplace for vacation rental homes.
Some vacation-home owners rent out of necessity because they can’t keep up with the mortgage payments. If one is having trouble making the bills, then they rent it out.
Market Watch, September 17, 2011
