Values in Select Second Home Markets up 22 Percent

By
Real Estate Broker/Owner with Mountain Real Estate Companies

Values In Select Second Home Markets Up 22 Percent

by Broderick Perkins

Homes in select second home markets are appreciating at more than twice the rate of homes in the national housing market, revealing what could be the mother-of-all residential real estate investments.

A new survey of homes in select second home markets around the nation reveals median home values rose 22 percent in the second quarter of 2004 compared to the second quarter or 2003. Nationwide, both new and existing housing appreciated only about half as much.

Orinda, CA-based EscapeHomes.com's Price Index for Second Homes could use some work, but it may be on to something.

EscapeHomes.com concedes the unscientific survey is not the last word in second home values. Not all second home markets or groups of second home markets appreciate as fast.

The survey is, however, an indication of what some second home owners already know -- popular second/vacation home markets can offer a better return on your investment than the general housing market.

EscapeHomes.com examined real estate agent and MLS data from Bend, OR; Holden Beach, NC; Incline Village, NV; Myrtle Beach, SC; Naples, FL; Park City, UT; Santa Barbara, CA; Sarasota, FL; St. Helena, CA and Truckee, CA.

The destinations were selected at random and the index is based on single-family detached homes' appreciation from the first quarter in 2003 to the second quarter in 2003 and appreciation during the same period in 2004. The index defines second homes as those being purchased for vacation, investment or retirement purposes.

The index found that median home prices in those popular second-home towns rose from $419,000 in 2003 to $511,000 during the second quarter this year -- a 22 percent increase.

Meanwhile, during the same period, the National Association of Home Builders saw the median price of existing homes nationwide rise from $187,900 to $209,900, a nearly 12 percent increase and the National Association of Realtors reported an increase in the median home price of new homes from $175,000 to $191,800, a 9 percent increase.

The National Association of Realtors in recent years has begun tracking the second home market nationwide and says 2003 was likely a record year for second-home sales with a projected estimate of 445,000 transactions, compared to 359,000 second homes sold in 2001, and 264,000 in 1991. The median price nationwide was $162,000 in 2001, but now stands at about $200,000, a 24 percent increase over three years, according to NAR.

David Hehman, president and CEO of EscapeHomes.com, a second- and vacation-home portal on the Internet for buyers, sellers and real estate agents who often carry the Resort Specialist designation, said because there currently is no way to extract pure second home data some of the homes in the survey could indeed be homes purchased as first homes, but the location of the purchases is key.

"We tried to get a random sampling of places with geographical and recreational attributes of second-home markets. We worked hard to pull (second homes) out specifically, working with agents and the MLS to get the cleanest data," said Hehman.

He also said EscapeHomes.com chose areas like Park City, Utah, known for second home activity and other locations where it was easier to pinpoint second home activity by ZIP code.

"Even if you lumped in all the homes for these areas it's an accurate representation of second home appreciation," he added.

Hehman wasn't sure if the survey would continue as a quarterly or twice-a-year survey but EscapeHomes.Com plans to rotate the cities examined to take the temperature of hot second home markets around the nation.

"Consumers have a need for this unique information and agents as well because they are not in the general population of real estate agents," Hehman said. "We continue to see strong price appreciation and high consumer demand in our Index markets for several reasons. First, the large base of baby boomers entering retirement years is putting pressure on these markets. Second, the top vacation and retirement markets are limited in choice homes. And finally, people are choosing real estate to diversify their portfolios, especially since interest rates are still at historic lows."

The growing baby-boomer market of well-off, aging Americans is the primary force in the second home market. Baby boomers are cashing in equity gains on existing property and tapping the benefits of favorable tax laws to buy up second home properties at such a pace that many popular second-home markets are becoming high-end enclaves where the local working stiffs are finding it more and more difficult to afford homes near their jobs.

More and more hot second home market surveys are churning out lists of "emerging" second home markets to give buyers "insider" investment information.

The last recession also encouraged many stock market refugees -- many of them boomers who nearly lost their shirts -- to look for safe investment havens in real estate. NAR says although most buyers buy second and vacation homes as play houses for recreational use, a benchmark survey of existing owners in 2002 demonstrated the growing interest in investment properties, rising steadily from 20 percent of second-home buyers in 1999 to 37 percent of buyers in 2002.

Also, the vacation property sector was one of few sectors in the travel market to get a boost from 911 when fearful travelers decided to stick closer to home and take more domestic vacations. Many of them discovered the value of vacation home rentals over hotels and motels.

"I would never sit here and give investment advice. I would never call the top or the bottom of the market, but certainly second homes have been a phenominal investment for people," said Hehman.

As quoted from http://www.utahrealestate.org/

 More Utah second home information can be found at http://www.mountainluxury.com/.

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