Us holiday home sales hit record high
US investment purchases fell in 2014 for the fourth year in a row, 1 in 20 were in a resort area Photo: Iain A Wanless
Lifestyle buyers are taking over the US property market, according to new figures, which show that sales of holiday homes have hit a record high, while investment purchases continue to fall.
The National Association of Realtors' latest Investment and Vacation Home Buyers Survey shows that holiday home sales jumped to an estimated 1.13 million in 2014, up 57.4 per cent year-on-year and the highest amount since NAR began the survey in 2003.
Investment purchases decreased 7.4 per cent to an estimated 1.02 million in 2014 (from 1.10 million in 2013). Owner-occupied purchases fell 12.8 per cent to 3.23 million last year from 3.70 million in 2013.
The sales estimates are based on responses from nearly 2,000 U.S. adults who purchased a residential property in 2014, and exclude institutional investment activity.
Lawrence Yun, NAR chief economist, comments on the "astonishing growth" seen by the vacation property sector: "Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment.
"Furthermore, last year’s impressive increase also reflects long-term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years."
Vacation-home sales accounted for 21 per cent of all transactions in 2014, their highest market share since the survey was first conducted. The portion of investment sales fell to 19 per cent (20 per cent in 2013); owner-occupied purchases declined to 60 per cent (67 per cent in 2013).
"Despite strong rental demand in many markets, investment property sales have declined four consecutive years to their lowest share since 2010 as rising home prices and fewer distressed properties coming onto the market have further reduced the number of bargains available to turn into profitable rentals," says Yun.
The median sales price of both vacation and investment homes declined in 2014. The median vacation home price was $150,000, down 11.1 per cent from $168,700 in 2013. The median investment-home sales price was $125,000, down 3.8 per cent from $130,000 a year ago.
According to Yun, the decrease in vacation and investment sales prices is likely due to the increase in vacation and investment buyers purchasing condos and townhouses, which contributed to a decline in the median size of 200 square feet for both. There was also a rise in the number of vacation buyers purchasing distressed properties and buying in the South, where home prices are often lower.
Investment-home buyers in 2014 had a median household income of $87,680 ($111,400 in 2013) and typically bought a detached single-family home (61 per cent) that was a median distance of 24 miles from their primary residence.
37 per cent purchased a property in the South, 26 per cent in the West, 20 per cent in the Midwest and 17 per cent in the Northeast. Investors were most likely (32 per cent) to buy in a suburban area, followed by an urban or central city (26 per cent), rural area (21 per cent) and small town (16 per cent). Five per cent of investment buyers bought in a resort area.
Investment buyers purchased property for a variety of reasons, including for rental income (37 per cent), because of low prices and the buyer found a good deal (17 per cent) and for potential price appreciation (15 per cent). Overall, investment buyers plan to hold onto the property for a median of five years (unchanged from a year ago), and a majority (68 per cent) are very or somewhat likely to buy another investment property in the next two years.
The bulk of investment buyers (86 per cent) and vacation buyers (85 per cent) reported that now is a good time to purchase real estate.