As the wealth gap in the U.S. continues to widen, the rich are apparently starting to invest in vacation homes again.
According to a report from the National Association of Realtors (NAR), vacation-home sales jumped 29.7% to an estimated 717,000 in 2013, compared to 553,000 in 2012, while investment purchases fell below the elevated levels seen in the previous two years.
NAR's 2014 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions, shows that owner-occupied purchases rose 13.1% to 3.70 million last year from 3.27 million in 2012, while investment-vacation-home sales fell 8.5%, dropping to an estimated 1.10 million from 1.21 million in 2012. The sales estimates are based on responses from households and exclude institutional investment activity.
‘Growth in the equity markets has greatly benefited high net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,’ says Lawrence Yun, chief economist for NAR, in a release. ‘However, vacation-home sales are still about one-third below the peak activity seen in 2006.’
Vacation-home sales accounted for 13% of all transactions last year – their highest market share since 2006 – while the portion of investment sales fell to 20% in 2013 from 24% in 2012.
Yun attributed the slowdown in investor-purchases to rising home prices and a declining availability of discounted foreclosures.
‘In 2011 and 2012, investment property was a no-brainer because home prices had sharply overcorrected during the downturn in many areas, creating great bargains that could be quickly turned into profitable rentals,’ he says. ‘With a return to more normal market conditions, investors now have to evaluate their purchases more carefully and do their homework.’
According to the report, the median investment-home price was $130,000 in 2013, up 13% from $115,000 in 2012, while the median vacation-home price was $168,700, up 12.5% from $150,000 in 2012.
As to be expected, many of these vacation-home sales were all-cash: About 46% of investment buyers paid cash in 2013, as did 38% of vacation-home buyers, according to the report.
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