Should You Buy A Second Home?
Some people are thinking that it may be a good time to buy into a second home rather then purchasing your primary home. The nation’s second home market seems to be repelling investors in waves and the blow is so crushing to the second home market that the nation’s primary housing market downturn pales by comparison. Second home sales fell last year, falling 18.56 percent to 2.72 million, compared to 3.34 million in 2005, according to the National Association of Realtors’ annual “Investment and Vacation Home Buyers Survey”.
Primary home sales fell only 4.1 percent to 4.82 million in 2006 from 5.02 million in 2005. The second home sales plunge took a chunk of market share along for the fall. Second homes now represent 36 percent of all homes sold in 2006, down from 40 percent in 2005. Blame speculators. Much in the way they were attracted to the second home market, finicky investors have left for greener pastures and the investment end of the second-home market is getting stiffed.
Investment home sales took a nose dive, falling 28.9 percent to 1.65 million in 2006 from a record 2.32 million in 2005. Twenty-two percent of all homes purchased last year were for investment purposes, down from the 28 percent market share in 2005. Meanwhile discretionary spending was still available to vacation home buyers who boosted sales at the vacation home end by 4.7 percent to a record 1.07 million in 2006, up from 1.02 million in 2005, NAR reported. That garnered greater market share. Fourteen percent of all homes purchased last year were vacation homes, up from a 12 percent share in 2005.
“We expected the drop in investment sales because speculators left the market in 2006, which caused investment sales to fall much faster than the primary market, but the rise in vacation home sales is based on strong demographic and lifestyle factors, with only modest interest in renting their properties to others,” said David Lereah, NAR’s chief economist, in a prepared statement. Prices in both categories fell, with investment properties hit hardest.
The median price of an investment property was $150,000 in 2006, off by 18.3 percent from $183,500 in 2005. The median price of a vacation home in 2006 was $200,000, down 2 percent from $204,100 in 2005. Lereah speculated investors were fleeing from condos and pricier markets while vacation home buyers picked over the spoils in less expensive markets. “This underscores that housing should always be viewed as a long-term investment, providing solid returns over time,” Lereah said.