Vacation home sales in 2015 were slower than the previous year, but still remained at the second highest amount in nearly a decade. Investment purchases, on the other hand, increased for the first time in five years, according to an annual survey released by the National Association of REALTORS® (NAR). Eighty percent of both vacation buyers and investment buyers believe that now is a good time to purchase real estate.
NAR's 2016 Investment and Vacation Home Buyers Survey, which covers existing and new home transactions in 2015, found that vacation home sales last year declined to an estimated 920,000, down 18.5 percent from their peak level of 1.13 million in 2014. Meanwhile, investment home sales last year rose 7 percent to an estimated 1.09 million from 1.02 million in 2014. Sales estimates are based on a national online survey including responses from over 2,000 U.S. adults who purchased a residential property in 2015, and exclude institutional investment activity.
"Baby boomers at or near retirement continue to propel the demand for second homes, although headwinds softened the overall volume of vacation sales last year," said NAR chief economist Lawrence Yun. "The expanding pool of buyers amidst a dwindling number of bargain-priced properties led to tighter supply and fewer sales and caused the price of vacation homes to rise. Furthermore, the turbulence that hit the financial markets the second half of the year likely seized some would-be buyers' available cash."
In Silicon Valley, Karen Trolan, president of the Silicon Valley Association of REALTORS®, said the expanding work force in the region, the very low inventory of homes for sale and rising home prices have led to a growing demand towards renting. "Investors are encouraged by the rising housing demand and home prices and see the benefit of purchasing property," said Trolan.
The median sales price of both vacation and investment homes soared in 2015. The median vacation home price was $192,000, up 28 percent from $150,000 in 2014. The median sales price for investment homes was $143,500, up 15.3 percent from $124,500 a year ago.
According to the survey, vacation home buyers in 2015 plan to own their property for a median of seven years, an increase from six years in 2014. More vacation home buyers purchased single-family homes (58 percent) compared to the previous year (54 percent). Forty percent of vacation home buyers purchased in a beach area, 19 percent purchased in the mountains or at a lakefront, and 16 percent purchased a home in the country.
Nearly half of all vacation homes bought last year were in the South (47 percent vs. 41 percent in 2014), particularly in several Florida markets; 25 percent were in the West (unchanged from a year ago); 15 percent in the Northeast (unchanged from a year ago); and 13 percent in the Midwest (14 percent in 2014).
The typical investment home buyer in 2015 bought a detached single-family home (62 percent) that was a median distance of 22 miles from their primary residence (24 miles in 2014). Compared to 2014, an increasing share of 2015 investment buyers - 42 percent, compared with 37 percent in 2014 - cited rental income as the primary reason for their purchase. Other reasons cited by investment buyers were low prices and a good deal (16 percent), and for potential price appreciation (14 percent).
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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