About 60 percent of second-home buyers own two or more homes in addition to their primary residence, according to the results of a National Association of Realtors survey.
About 53 percent of investment-property buyers own two or more investment homes and 12 percent own two or more vacation homes. Also, about 21 percent of all vacation-home buyers own two or more vacation homes, and 34 percent own two or more investment properties.
The Profile of Second-Home Owners survey results are based on an eight-page questionnaire that was mailed in January 2006 to 45,000 households who own more than one residential property. The survey generated 416 usable responses from vacation-home owners and 619 from investment owners, the Realtor association reported.
Most of the survey respondents reported that they own multiple properties in addition to their primary residence.
Second-home purchases are no small trend: Second-home sales accounted for an estimated 40 percent of all residential transactions in the country in 2005, up from 36 percent in 2004, the Realtor group reported in April.
And U.S. Census Bureau data shows there are 6.8 million vacation homes in the United States and 37.4 million investment units, in addition to 74.6 million owner-occupied units.
The typical vacation-home owner is 59 years old, earned $120,600 last year, and purchased a property that is 220 miles from his/her primary residence. About 34 percent were less than 100 miles and another 34 percent were 500 miles or more away from this vacation home. Eight of 10 drive to their properties, and half of vacation homes are located within the same state as the owner’s primary residence, the survey found. About 83 percent of owners are married couples.
Three-fourths of vacation-home owners purchased for personal use, one-third also wanted to diversify investments, and 18 percent intended that the home would become a primary residence in retirement. About 13 percent of vacation owners listed rental income as a reason to buy.
The typical owner spends 39 nights per year at their property, and three-quarters do not rent the property. Of those who do rent their vacation home, the median number is 12 nights per year.
The median age of an investment owner is 55, with an income of $98,600 in 2005; 75 percent of owners are married couples. Their investment property is located close by, within a median distance of 10 miles, the Realtor group reported.
Two-thirds of investment-home owners purchased their property to generate rental income, and half viewed the property as a way to diversify investments. About 80 percent spend no time in their property and 80 percent rent it out, with 73 percent renting for at least six months per year, according to the survey.
David Lereah, NAR’s chief economist, said the market continues to be dominated by the baby boomer generation.
“Middle-aged, middle-income households are the driving factor in the second-home market, with favorable demographics providing a solid fundamental demand in this sector for the next decade,” Lereah said.
“Boomers believe in diversifying their assets, and most second-home owners see their purchase as being a better investment than stocks. A surprising majority of survey respondents hold multiple properties, and they are interested in purchasing additional homes.”
Minorities are a growing force in the second-home market and accounted for 11 percent of vacation-home purchases between 2003 and 2005, compared with 6 percent of purchases in 2002 and earlier. In the investment property segment, minorities accounted for 17 percent of transactions from 2003-05, compared with 11 percent in 2002 or earlier.
Thomas M. Stevens, NAR president and senior vice president of NRT Inc., said, “The fact that so many owners of vacation homes and investment property have additional properties is a bit of a revelation.
“We’ve always known that a certain segment has invested heavily in the rental market, and some people earn their living simply by holding and managing investment property. What we see now is a crossover between largely vacation- and investment-home owners, with people recognizing the value of those investments and pouring more assets into real estate,” Stevens said.
For all second-home owners, their most recent property was purchased a median of six years ago, and most have held additional properties for longer periods.
Among vacation-home owners, two-thirds want to be close to an ocean, river or lake; 39 percent close to recreational or sporting activities; 38 percent close to vacation or resort areas; and 31 percent close to mountains or other natural attractions.
Vacation-home owners said they enjoy leisure activities such as beach, lake or water sports (57 percent); boating (38 percent); hunting or fishing (32 percent); golf (21 percent); biking, hiking or horseback riding (20 percent); ski or winter recreation (17 percent); and tennis (9 percent).
Half of vacation homes are located in resort or recreational areas, 18 percent in small towns and 16 percent in rural areas. Four out of 10 are detached single-family homes; 22 percent are cabins or cottages; 21 percent are condos in buildings with five or more units; 7 percent are townhouses or row houses; 5 percent are mobile or manufactured homes; 3 percent are units in two- to-four-unit structures; and 1 percent are other property types. Six percent said their vacation home is a timeshare unit.
The median size of a vacation home is 1,480 square feet, 29 percent were new when purchased, and owners estimated the current value to be a median of $300,000 – 68 percent said the value of that property was lower than their primary residence. Sixty-five percent of owners said their vacation property was a better investment than stocks.
Six out of 10 investment properties are located within metropolitan areas; half are single-family homes; 21 percent are duplexes or apartments in a two- to-four-unit structure; 13 percent are condos in a building with five or more units; 8 percent are townhouses or row houses; 3 percent are mobile or manufactured homes; 2 percent are cabins or cottages; and 4 percent are other property types.
The median size of an investment property is 1,520 square feet, 15 percent were new when purchased, and owners estimated the current value to be $200,000. Three-fourths said the value of their investment property was lower than their primary residence, and 70 percent said their property was a better investment than stocks.
Four percent of vacation-home owners and 8 percent of investment owners said they intended for their child to occupy that property while in school.
Among buyers of second homes in recent years (since 2003), two-thirds purchased through a real estate agent. Eighteen percent of vacation homes and 17 percent of investment properties were purchased directly from owners, while 14 percent of vacation homes and 7 percent of investment properties were purchased directly from builders, the Realtor group reported.
Thirty-two percent of all vacation-home owners and 24 percent of investment property owners paid cash for their property. Combined with mortgages that have been paid off, 82 percent of vacation homes and 75 percent of investment properties are owned free and clear.
Of owners who purchased with a mortgage, the median down payment on a vacation home was 27 percent and the median down payment for an investment home was 23 percent.
When asked about the source of down-payment money for more recent vacation-home owners with loans who purchased since 2003, half said savings, 23 percent used money from the sale of other real estate, and 19 percent identified equity or sales proceeds from their primary residence.
For more recent investment owners who purchased with mortgages, half said down-payment funds came from savings, 28 percent used equity or sales proceeds of their primary residence, and 18 percent used money from the sale of other real estate.
Eleven percent of vacation-home owners said they were planning to buy another home within two years, and 10 percent said they planned to sell.
About 35 percent of all investment-home owners said they were planning to buy another home within two years. For those who currently own four or more investment units, 64 percent said they plan to buy another property within two years, and 17 percent said they plan to purchase five or more additional properties.
Twenty-eight percent of investment owners plan to sell a property within two years, according to the survey results.
The full study results can be purchased online at http://www.realtor.org/prodser.nsf/OpenProd?OpenForm&IN=186-55-06 or by calling (800) 874-6500. The cost is $50 for NAR members and $125 for non-members.
