The National Association of REALTORS® (NAR) reports nationwide sales of investment and vacation homes surged last year. The shift in investment buyer patterns in 2011 illustrates that the market, for the large part, is able to absorb foreclosures, according to NAR.
NAR's 2012 Investment and Vacation Home Buyers Survey, which covers existing- and new-home transactions in 2011, indicates sales of investment-homes rose 64.5 percent to 1.23 million last year from 749,000 in 2010. Vacation-home sales were up 7 percent to 502,000 in 2011 from 469,000 in 2010. Their combined market share was at the highest level since 2005, according to NAR. Vacation-home sales made up 11 percent of all transactions in 2011, up from 10 percent in 2010, while the investment-home sales share was 27 percent in 2011, up from 17 percent in 2010.
"During the past year investors have been swooping into the market to take advantage of bargain home prices," said Lawrence Yun, NAR's chief economist. "Rising rental income easily beat cash sitting in banks as an added inducement."
Forty-nine percent of investment-home buyers paid cash in 2011, as did 42 percent of vacation-home buyers. Half of all investment home purchases in 2011 were distressed homes, as were 39 percent of vacation homes. Yun said the surge in investment purchases indicates REO (bank real estate owned) inventory is not in the market for an extended period.
"Any government program to sell REO inventory in bulk to large institutional companies should be limited to small geographic areas," he said.
Eight out of 10 second-home buyers said it was a good time to buy. Half of investment buyers said they purchased primarily to generate rental income, and 34 percent wanted to diversify their investments or saw a good investment opportunity. Thirty percent of vacation homes and 23 percent of investment properties purchased last year were in the West.
"It's evident that investors realize real estate is a good investment and are not hesitating to purchase property they know will pay off for them as rental property. Current interest rates are at record lows, so those who can are not hesitating paying cash for second homes which they can use for family vacations, a family retreat, or future retirement home," said Suzanne Yost, president of the Silicon Valley Association of REALTORS®.
The median investment-home price was $100,000 in 2011, up 6.4 percent from $94,000 in 2010. The median vacation-home price was $121,300, down 19.1 percent from $150,000 in 2010.
U.S. Census Bureau data shows there are eight million vacation homes and 42.8 million investment units in the U.S., compared with 75.3 million owner-occupied homes. The 2012 Investment and Vacation Home Buyers Survey, conducted in March 2012, includes answers from 2,241 usable responses about home purchases during 2011.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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