Vacation homes have made a surprising recovery and with spring weather upon us, the market is heating up. The housing crash certainly hit the vacation home market hard but 2013 saw a strong recovery and 2014 looks to be a stand out year. Obviously, vacation homes are dominated by the upper income households and they’ve seen substantial growth in investment funds from the stock market rally. Now, many are looking to diversify their investment holdings into real estate in the form of vacation homes or vacation rentals.
Vacation Homes By the Numbers
Sales of vacation homes were up 30 percent in 2013 compared to 2012. That pushed prices up 12.5 percent to the highest mark since 2006. With the vacation home season just getting underway, the 2014 numbers are expected to outpace 2013.
Some are buying vacation homes as investments. Five percent who bought last year have already sold the house for a profit. Another nine percent plan to sell before this year is over. Another 28 percent say they bought their vacation home as an investment to diversify their holdings.
Income Producing Vacation Homes
As an investment, many of these vacation homeowners are placing the properties up for rent to create an additional income stream. So far this year, they appear to be doing well. A full 52 percent of vacation homeowners report being booked for at least the first half of the year. Vacation home specialist Home Away reports that a full 70 percent of vacation homes were rented out during the winter months and expects a very strong showing during the traditional summer vacation season.
The 70 percent occupancy rate for vacation homes compares to a 60 percent occupancy rate for hotel rooms during the same time. And 84 percent of owners report this year’s bookings are the same or better than last year.
One noticeable new trend is that buyers during this cycle have been younger than in previous cycles. Today, the typical vacation homebuyer is only 43 years old. This is undoubtedly a reason more homes are being offered for rent. Younger owners have less vacation time and the homes sit vacant longer if they aren’t rented out. These younger buyers are taking advantage of the low prices and low interest rates. In the industry, it’s become known as the rent-to-retire boom. Younger buyers are buying vacation homes to rent out until they reach retirement age when they plan to live in them full time.
At popular destinations like the New Hamptons, sales may not be occurring the day they are listed but many are selling within the first two weeks. For the first quarter of this year, the highest demand has been in Dauphin Island, Alabama, Moab, Utah, and Cape San Blas, Florida, according to Homes Away.
If you’ve never thought about investing in a vacation home or are looking to diversify your investments, now is the time to take a close look at vacation home rentals.
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Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.