Vacation home sales are down and investment purchases are more prevalent than they’ve been for the past five years, according to the National Association of Realtors’ 2016 Investment and Vacation Home Buyers survey.
Total vacation home sales declined to 920,000 in 2015, down 18.5 percent from 2014’s peak of 1.13 million. Furthermore, vacation home sales accounted for 16 percent of 2015’s transactions, which is 5 percent less than the previous year.
Vacation home prices grow as sales decline
Despite decline in sales and transaction shares, the median price of a vacation home jumped significantly to $192,000 — 28 percent higher than 2014’s $150,000 average. 2015’s owner-occupied purchases stood at 3.74 million, a 15.4 percent jump from 2014 and the best numbers we’ve seen since 2007.
Fifty-eight percent of vacation buyers purchased single-family homes, and the most popular region for vacation home purchases was the South, accounting for 47 percent of the market. On the other hand, the Midwest lagged behind at only 14 percent.
“Baby boomers at or near retirement continue to propel the demand for second homes, although headwinds softened the overall volume of vacation sales last year,” said NAR chief economist, Lawrence Yun, in a press release.
“The expanding pool of buyers amidst a dwindling number of bargain-priced properties led to tighter supply and fewer sales and caused the price of vacation homes to rise,” Yun added.
“Furthermore, the turbulence that hit the financial markets the second half of the year likely seized some would-be buyers’ available cash.”
Investment home sales on the rise
Although the vacation home market cooled down to a simmer, the investment market heated up. Investment-home sales jumped to an estimated 1.09 million, 7 percent higher than 2014’s 1.02 million.
Furthermore, the median investment-home price experienced a boost as well, with a 15.3 percent increase to $143,500. Investment home purchases stayed flat at 19 percent, the same as 2014’s numbers.
Just like vacation-home buyers, investment buyers favored single-family homes (62 percent) and flocked to the South to make their investments (37 percent).
“Despite a smaller share of distressed properties coming onto the market, investment purchases reversed course in 2015 after declining for four straight years,” Yun said. “Steadily increasing home prices and strong rental demand appear to be giving more individual investors assurance that purchasing real estate will diversify their portfolios and generate additional income if they decide to rent out the home.”
‘A good time to buy’
Forty-two percent of investors and 24 percent of buyers tried or did rent out their home in 2015 and plan to do the same in 2016.
Vacation homebuyers are most likely to use a property manager or a social media platform to rent their homes, while investors lean on the expertise of Realtors.
Lastly, 80 percent of vacation home and investment buyers believe it’s a good time to buy real estate despite the obstacles of low inventory and tight financing.
