You might think that with foreclosure sales growing across the country and homeowners experiencing reduced equity levels, vacation homes sales would be down, but you would be wrong. In 2011 they were up, with the majority of sales going to investors, not owner-occupiers.
Even though sales of vacation homes are up, Kevin Gillen, Philadelphia economist and vice president at Econsult Corp. says that vacation home sales are well below average. “While I can’t speak to the composition of investor vs. owner-occupant sales, it seems to be the case that investors aren’t flocking en masse to the Shore in anything like the big numbers we hear about in Vegas or Phoenix,” said Gillen.
Avalon Real Estate’s Paul Leiser noted that “we are seeing more investors buying these days, especially in the lower to middle price ranges, than we had seen for several years.”
Exactly what constitutes an investor, however, depends. “Investor can mean someone who is buying strictly to rent the property out as much as possible for as many years as they plan on owning it, then ultimately selling the place for an expected long-term capital gain at some point down the road,” stated Leiser. “We are also seeing buyers who plan to rent their new property for only a portion of each summer and then use it themselves for the rest of the time. Or their plan could be to rent their new place for only a summer or two, before they convert it to personal use.”
Leiser believes that the uptick in sales could indicate that buyers view the market conditions as a prime opportunity to “move up” by taking advantage of lower prices. He also thinks that being able to rent the house out part time will help buyers recoup the costs of owning the property, which is located in a better location than what they could have perhaps been able to afford before prices fell.
Obviously, second homes and vacation properties which remain vacant for part of the year are among the first to be sold, even at a loss, than a primary residence, which may account for some of the increase in sales of this type of property.
Until and unless the economic forecast of not only the nation but individuals begins to improve, it’s highly likely that we will see even more liquidation of vacation homes as this next year unfolds.
Anita Cooper has been writing about real-estate topics since 2010. Her articles have appeared in the trade magazine “Real Estate Wealth,” as well as on various websites. Cooper owns and operates a small writing business providing website and copy-writing material to real-estate professionals.