Second Homes No Longer Second Seat as Demand Grows
Images for this post are temporaraly unavailable.
Despite increased energy costs, the second home market—like the primary dwelling market—continues to heal albeit in a new mode not seen in the days of cheaper gasoline.
A recent series of articles on second homes shows a new approach to second homes coupled with rising demand. Here are latest statistics on the second home market sourced primarily from a survey conducted by the National Association of Realtors®:
- Second home sales rose 7 percent in 2011 compared to 2010
- 42 percent of second home buyers paid cash in 2011 per the National Association of Realtors® (NAR) compared with 36 percent in 2010
- Median second home sales prices were 19 percent less in 2011 at $121,300 compared to 2010 due in part to excess inventory
- Median income of home buyers (NAR Study) was $88,600 in 2011, down 10.9 percent from 2010
- Loans remained difficult to obtain as down payments on standalone properties ran in the 20 to 25 percent range (versus 10 percent for primary dwellings) and 30 percent for attached second homes (condos, row houses or townhouses). In the purchases of primary dwellings in 2011, 34 percent of buyers paid down 20 or more percent
- Lenders prefer making second home property loans that are located near resorts (ski areas, beaches or lakes) and at least 50 miles from the owners primary dwelling. If the second home fails to meet these, the lender may perceive the purchase to be more of an investment property than a true second home (mortgage loan rates on second homes typically are the same as primary dwelling loans while investment properties require a greater interest rate from lenders)
- Median distance between the second home and primary dwelling was 305 miles in 2011, down 19 percent from the 2010 level according to NAR – obviously impacted by rising gasoline and diesel costs
- 33 percent of second home buyers purchased in 2011 as a result of extremely low and affordable prices
- 91 percent of second home buyers intend to rent their properties within the first 12 months when not personally using them
- 71 percent said the rental income potential influenced their purchase decision
- Median second home buyer age was 50 years old contrasted to mid- to late 40s in prior study
The bottom line is that, just as in primary dwellings, the number of sales is rising given attractive home prices and extremely low opportunity costs. Down payments are up and energy is skewing buyers to search a little closer to home. I would speculate also that Web sites such as Vacation Rentals By Owner VBRO® and HomeAway®, which may reduce rental marketing costs, are encouraging greater numbers of second home buyers given that more than 90 percent are planning on at least part time rentals of their dwellings.
Second homes remain on sale—a great time to stock up.