Here we are, seventeen days away from the expiration of the extension of the First-time Homebuyer Tax Credit. The initial expiration of the Tax Credit created a mini-flurry of activity, as first-time buyers scurried to purchase and close before the deadline. The current expiration hasn't created nearly the activity provided by the original one. Now that the First-time buyers market may slow down, where are the buyers going to come from?
The National Association of Realtors released statistics showing that Second Home Buyers are coming back into the market. The report showed vacation home sales increased even more than the sale of primary residences in 2009. Vacation home sales rose 7.9%, while primary residence sales grew 7.1%. The report also revealed that investment property sales decreased 15.9% during the same time period.
NAR Chief Economist, Lawrence Yun said, "The typical vacation home buyer is making a lifestyle choice, with nine out of ten saying they intend to use the property for vacations or as a family retreat. Investment buyers primarily seek rental income, with six in ten planning to rent to others and another two in ten wanting to provide use of the home to a friend or family member."
Most vacation home buyers intend to use the property for personal use with only twenty percent planning to rent it periodically. The median price of a vacation home in 2009 was $169,000, substantially higher than the $150,000 the previous year. Vacation home sales represented ten percent of the market in 2009, while investment property purchases constituted seventeen percent of the market.
So, who are these second home buyers? Three out of four second home buyers were married couples. The typical vacation home buyer was 46 years old, had a median household income of $87,500 and purchased a property that was a median distance of 348 miles from their primary residence. Investment home buyers had a median age of 45 and earned $87,200 a year. They bought homes that were relatively close to their primary residences, a median of 24 miles. Interestingly, one in four investment property buyers purchased more than one property in 2009.
NAR Economist Yun went on to say, "Prospects for continued sales of second homes are favorable because the nation's demographic profile shows a large number of people who are in the right age bracket for such purchases. The large number of people now in their 30s and 40s will dominate the second home market in the coming decade with a strong underlying demand." Mortgage lending for a second home was extraordinarily tight in 2009, but is expected to ease a bit in 2010 and going forward.
With second home purchases coming back into favor, harder hit vacation destinations like Florida, California and Arizona should benefit from distressed property sales and very affordable prices for years to come. If you're not doing so already, it's time to set your sights on the vacation home market.
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