The National Association of Realtors recently released their 2017 Investment and Vacation Home Buyers Survey. The survey revealed many characteristics of both vacation home purchasers and investors. Today, we want to concentrate on the vacation real estate market.
The survey found that vacation-home sales last year declined to an estimated 721,000, down 36% from their most recent peak level of 1.13 million in 2014. However, this is still the third highest number of vacation sales since 2006.
The share of primary home buyers rose in 2016 to 70 percent of all homes sold on the market from 65 percent in 2015. Buyers who purchased to live in a primary residence bought 70 percent of all homes in 2016 for a total of 4.2 million properties. The remaining 30 percent of homes were snatched up by investors and vacation home buyers—1.14 million investment properties and 721,000 vacation homes. The major trends for 2016: vacation homes sales went down for the third straight year to 12 percent from 16 percent in 2015 and investor sales remained steady at 19 percent.
Vacation Home Sales
Vacation home sales declined overall 21.6 percent from 2015 to 2016, however the share of 12 percent returns to the historical norm collected since 2003. The median sales price for a vacation home in 2016 was $200,000, an increase of 4.2 percent over 2015. For vacation homes, popular destinations were the beach (36 percent), lakefront (21 percent), and the country (20 percent). They were largely purchased in rural (25 percent) and resort areas (25 percent) that were a median of 200 miles from the buyer’s primary residence.
Vacation and investment properties tend to be smaller units. Twenty-one percent of vacation properties purchased last year were townhomes and 22 percent were condominiums. Comparatively, 86 percent of primary residences purchased were detached single-family homes. The median square footage of vacation properties was 1,460, whereas a primary residence tends to be 1,900 square feet.
Twenty-eight percent of vacation home buyers did not use a mortgage. Of the 72 percent that used a mortgage, 45 percent financed less than 70 percent of the purchase price. For primary residence home buyers, 23 percent financed between 80 and 89 percent.
The primary reasons buyers cited purchasing vacation homes were to use for vacations or as a personal and family retreat (42 percent), for future retirement (18 percent), and low real estate prices or good deals (12 percent). Eighty-one percent of vacation home buyers feel that now is a good time to buy a home making vacation buyers the most positive group. The median household income in 2016 for vacation home buyers was $89,900.
Investment Home Sales
Investor home sales, on the other hand, increased slightly by 4.5 percent from 2015 to 2016. The median sales price for an investor home in 2016 was $155,000, an increase of 8.0 percent over 2015. Investment properties were largely purchased in suburban (34 percent) and urban areas (23 percent) at a median of 20 miles from a buyer’s primary residence.
Twenty-five percent of investment properties were condominiums and 11 percent were townhomes. Similar to vacation homes, 18 percent of investment purchases were homes in foreclosure and 17 percent short sales. Only five percent of primary residences are homes in foreclosure and four percent short sales.
The primary reasons buyers cited purchasing investment homes were to generate income through renting property (37 percent), potential for price appreciation (16 percent), and low real estate prices or good deals (15 percent). Seventy-six percent of investor home buyers feel that now is a good time to buy a home. The median household income in 2016 for investor home buyers was $82,000, compared to primary residence owners at $75,000.