As you enjoy your annual summer vacation in Hawaii, Lake Tahoe or perhaps the scenic Monterey Peninsula, it's only natural to start thinking about owning your own vacation home so the holiday never has to end. If you've been kicking around the idea of buying a second home, you're not alone.
According to the National Association of REALTORS®, vacation home sales have been soaring in recent years as the housing market has rebounded and the stock market continues to be strong. NAR’s 2015 statistical analysis estimates that sales of vacation properties in the U.S. jumped to a record 1.13 million in 2014, the most vacation homes sold in any year since NAR began keeping track of this segment of the market in 2003.
According to NAR's 2015 Investment and Vacation Home Buyers Survey, sales of vacation properties spiked 57% last year compared to 2013. In fact, sales in 2014 were nearly double the number of the previous two years combined.
NAR says that the average vacation homebuyer had a median household income of $94,380. Vacation homebuyers acquired properties that were a median distance of 200 miles away from their primary residence. Four out of 10 buyers bought a vacation home in a beach area while 19% purchased in the country and 17% purchased in the mountains.
So is now the right time for you to buy a vacation home of your own? Here are a few things to consider if you are in the market:
- Choose your location carefully. Most vacation homebuyers should choose a location that offers the greatest number of amenities and benefits that fit with their interests, whether it’s a beach resort, a ski area, or a place to play golf. If you want your friends and family to enjoy it with you, you may want it to choose a place that is conveniently located for all of the people you want to use that home. As wonderful as Hawaii might be, jumping on a plane for five hours may be a physical or financial challenge for some people. That's perhaps one reason why buyers in NAR's® vacation home survey bought a property that was a median distance of 200 miles from their main home.
- Visit the destination multiple times before buying. Before purchasing in any particular area, you may want to consider staying in local accommodations or possibly renting a home in your preferred area at various times of the year and hopefully for extended periods of time so as to get a better sense of the locale. You should make sure that you won't get bored with the location of your second home. Some people buy a vacation property with the ultimate intent of using it as their retirement home. Thus, it is important to think about how the location will fit into your short and long term plans and to consult with your financial planner as to the best means of achieving those goals.
- Be realistic about costs and how often you will use the second home. Just like a primary residence, there are far more costs to owning a vacation home than the down payment and the mortgage. Property taxes, local assessment districts, homeowners’ association fees and costs, maintenance costs and utilities can add up quickly. It is also important to factor in how often you are likely to use the home as compared to the cost of ownership.
- Buying with an eye to renting. NAR® statistics show that approximately one out of every four vacation homebuyers plan to rent out their properties at least occasionally, but there are potential drawbacks to renting to strangers There are no assurances that vacation homes can be successfully rented and some jurisdictions (as well as some common interest developments) limit the ability of homeowners to rent their properties to others on either a short term or long term basis. It is best to do your homework and consult with your legal, tax and insurance advisors before buying any property that you may want to use for any type of rental purposes.
- Get help from a professional REALTOR®. With mortgage interest rates still historically low and the housing market bouncing back, this may be a good time to buy a vacation home. But finding the right property at the right price that meets your needs can be a challenge. It's important to work with an experienced real estate professional who understands the particular market you're considering, as well as vacation home purchases in general. With the assistance of a knowledgeable REALTOR®, I know you'll be able to find that special vacation home that you and your family can enjoy for many years to come. Let me know if I can help!