Vacation homes becoming popular once again

Photo: Darcie

Sales of vacation homes rose strongly in 2013, according to the National Association of Realtors, with transactions jumping 29.7 per cent from 2012. Holiday homes accounted for 13 per cent of all sales in 2013, their highest share since 2006.

“Growth in the equity markets has greatly benefited high net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,” says NAR Chief Economist Lawrence Yun. “However, vacation-home sales are still about one-third below the peak activity seen in 2006.”

Lifestyle factors remain the main motivation behind a holiday home purchase. The typical buyer was 43 years old, had a median household income of $85,600 and purchased a property that was a median distance of 180 miles from his or her primary residence.

87 per cent of buyers said they wanted to use the property for vacations or as a family retreat, while 31 per cent planned to use it as a primary residence in the future. (Indeed, 5 per cent of vacation-home buyers had already resold their property, while another 9 per cent planned to sell within a year.)

28 per cent, on the other hand, wanted to diversify their investments or saw a good investment opportunity, with 23 per cent planning to rent to others.

At the same time, the number of sales of property for investment purposes declined following two strong years of speculative activity. The portion of investment sales fell to 20 per cent in 2013 from 24 per cent in 2012: a drop from 1.21 million in 2012 to an estimated 1.10 million in 2013.

Yun says the pullback in investment activity is understandable. “Investment buyers slowed their purchasing in 2013 because prices were rising quickly along with a declining availability of discounted foreclosures over the course of the year.

“In 2011 and 2012, investment property was a no-brainer because home prices had sharply over corrected during the downturn in many areas, creating great bargains that could be quickly turned into profitable rentals. With a return to more normal market conditions, investors now have to evaluate their purchases more carefully and do their homework."

With those normalised market conditions comes improved sentiment among buyers and homeowners, particularly those feeling confident enough to snap up a second home. 41 per cent of vacation homes purchased last year were in the South, followed by 28 per cent in the West, 18 per cent in the Northeast and 14 per cent in the Midwest.