Investment home sales dominated the second home market in 2016, off the charts by 4.5 percent to total 1.14 million, according to the National Association of REALTORS® (NAR) recently released 2017 Investment and Vacation Home Buyers Survey—but vacation home purchases plunged, down 21.6 percent to a total 721,000.
NAR Chief Economist Lawrence Yun attributes the vacating of vacation home sales to low supply and unaffordability—the same issues plaguing the housing market overall.
“In several markets in the South and West—the two most popular destinations for vacation buyers—home prices have soared in recent years because substantial buyer demand from strong job growth continues to outstrip the supply of homes for sale,” says Yun. “With fewer bargain-priced properties to choose from and a growing number of traditional buyers, finding a home for vacation purposes became more difficult and less affordable last year.”
Vacation home sales, according to Yun, are now 36 percent below their 2014 peak. The median vacation home price was $200,000, a 4.2 percent increase from 2015, with the share of all-cash purchases down to 28 percent from 38 percent in 2015. Vacation home sales totaled 12 percent of all transactions in 2016—the lowest share since 2012.
The median investment home price, to compare, was $155,000, an 8 percent increase from 2015, with the share of all-cash purchases down to 35 percent from 39 percent in 2015. Investment home sales totaled 19 percent of all transactions in 2016, unchanged.
“Sales to individual investors reached their highest level since 2012 (1.20 million) as investors took advantage of record low mortgage rates and recognized the sizeable demand for renting in their market as renters struggle to become homeowners,” Yun says. “The ability to generate rental income or remodel a home to put back on a market with tight inventory is giving investors increased confidence in their ability to see strong returns in their home purchase.”
What motivated investment home- and vacation homebuyers? According to the survey, 42 percent of investors bought a property with the purpose of generating rental income, and 16 percent of investors bought for potential price appreciation. Forty-two percent of vacation homebuyers bought for “a family retreat” or vacation use, and 18 percent bought for retirement.
Many investment- and vacation homebuyers, in addition, rented their property short-term—less than 30 days.
View more from the survey online at www.realtor.org/prodser.nsf/Research.
For more information, please visit www.nar.realtor.
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