Last week, we covered a new trend that involves purchasing your retirement home decades before you actually plan to use it. As it turns out, retirement living facilities are not the only “second-home” investment growing in popularity these days. According to the National Association of Realtors (NAR), vacation home sales are also on the rise. In fact, the sale of vacation homes rose 10.1 percent in 2012, and the sale of these second homes account for 11 percent of all transactions last year [1]. NAR chief economist Lawrence Yun described the trend as an indication of things to come, saying that “second-home buyers tend to be a step ahead of general buyers in sensing a market recovery.” Typical vacation-home buyers are 47 years old with a median household income of $92,100. They tended to purchase properties a median distance of 435 miles from their primary residences and planned to own the property for a median of 10 years.

Yun credited 2012’s overall “strong stock market recovery” with giving buyers the confidence and security to invest in vacation homes for their own use, and added that low bond and money-market yields could also be pushing affluent buyers in the direction of real estate[2]. Today’s vacation-home market is still full of bargains; in 2005 the median price of a vacation home was $204,100 while today the median price is 36 percent lower. Yun warned that the window of opportunity in this market sector could be closing fast, however. “With rising prices and limited inventory…investors are likely to step back in the coming years,” he said, implying that lower levels of investor involvement even in the less-popular vacation home sector could push prices back down.

By Carole VanCickle