Us investor boost: holiday homes still a 'big draw'

Holiday home sales in the United States improved in 2012, up 10.1% compared with the previous year but investment sales fell back, data from the National Association of Realtors.

PropertyWire reports that the association, which represents estate agents across the country, said that holiday home sales accounted for 11% of all transactions last year, unchanged from 2011 while investment sales were 24% of the market, down from 27% in 2011.

NAR chief economist Lawrence Yun said favourable market conditions are driving second home sales. ‘We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes. Attractively priced recreational property is also a big draw,’ he explained.

With prices rising strongly Yun pointed out that it is not a surprise that investment purchased are falling. ‘Investors have been very active in the market over the past two years, attracted mostly by discounted foreclosures that could be quickly turned into profitable rentals. With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years,’ he said.

The median investment home price was $115,000 in 2012, up 15% from $100,000 in 2011, while the median vacation home price was $150,000, compared with $121,300 in 2011, reflecting a greater number of more expensive recreational property sales in 2012.

All cash purchases remain common in the investment and vacation home market with half of investment buyers paying cash in 2012, and 46% of vacation home buyers doing so. Some 47% of investment homes bought in 2012 were distressed homes, as were 35% of vacation homes.

Of buyers who financed their purchase with a mortgage in 2012, large down payments remain typical. The median down payment for both investment and vacation home buyers was 27%, the same as in 2011.

Investment home buyers in 2012 had a median age of 45, earned $85,700 and bought a home that was relatively close to their primary residence, a median distance of 21 miles, although 29% were more than 100 miles away. Some 35% of investment buyers purchased more than one property.

Yun also said that property flipping modestly increased in 2012. ‘However, this isn’t flipping in the sense of what took place during the housing boom. Rather, investors generally are renovating and improving properties before placing them back on the market to resell at a profit,’ he explained.