Vacation property purchases decreased 30.6 percent in 2007, while their median price dropped 2.5 percent to $195,000, according to a survey by the National Association of Realtors. That may sound like more blasé news from a beleaguered economy, but if you still have income to invest, there may be no better time to buy a second home. Here’s why: Markets will always fluctuate, but prime urban, beach, lake or mountain real estate is finite.
The golden rule when looking for vacation property, according to David Siroty, senior director of PR and communications for Coldwell Banker, is to follow your passion. “Whether you like to ski, golf, shop or eat,” says Siroty, “passion and lifestyle will play a critical role.” In other words, a vacation property in Aspen makes no sense if you don’t love to ski, regardless of whether it’s all the rage or a good investment.
Another essential, according to the NAR, is to buy within 300 miles of your primary residence, especially with current fuel prices. That’s a critical reason Lake Tahoe, Calif.; Summit County, Colo.; and Myrtle Beach, S.C., are still solid markets for a second home while resorts like Tamarack, in west-central Idaho, have filed for bankruptcy.
“People will always want to come to the mountains,” says Dennis Johnson, a broker for Paffrath & Thomas in Breckenridge and the former chairman of the Resort and Second Home Property Committee for the NAR. “But it’s better if the mountains are easily accessible.”
Summit County is right off I-70, less than two hours from Denver, within close proximity to four ski areas, and is 83 percent national forest.
“My first advice is to get into the market,” says Johnson. So far in 2008, year-to-date sales in the $1 million and higher category match last year’s sales. But there are plenty of opportunities below that price point. “If you’re not comfortable with a $600,000 second home, start with a one-bedroom condo,” says Johnson.
In general, there’s no hard-and-fast rule for discerning whether you can afford a second home, but many of Johnson’s customers make a 20 to 25 percent cash down payment or even liquidate other assets to pay for the entire second home in cash.
If you do start with a condo or any property linked to an association as your second home, says Barry Nystad, president of the National Association of Exclusive Buyer Agents, beware of pitfalls in developments where there are a lot of units for sale.
“Some condos may be in foreclosure and owners may not be paying their fees,” says Nystad. “That starts to impact the budget and the appearance of the property and that’s a big, big issue. You need to be extra careful because you won’t be able to follow up like you would if it were your primary residence.” Florida and Las Vegas, he says, have been particularly hard hit.
Carefully study an area’s supply and demand and work with a buyer’s agent who understands the local market, Nystad advises. Like Breckenridge, Tahoe is booming on the high end: Home sales of $1 million or higher climbed 26 percent from July 2007 to July 2008. But below the million-dollar mark prices are softer than in their 2005 heyday.
“There are some really great deals to be had,” says Bill Fiveash, the vice president of sales for Tahoe Mountain Resorts. “Developers are a little bit softer on their pricing and are more flexible when offers come in to make sure they get the deal done.”
Homes under $1 million may be soft now, but a second home in Tahoe will hold value in the long run for three main reasons: “First, its convenience. Having a second home within a two- to three-hour drive of a primary home is a top request from our buyers,” says Fiveash, adding that 70 percent of his buyers are from the Bay Area. “Second, Tahoe is a true four-season destination. And finally, we’re offering something new after many years of no development — with the addition of golf courses, new restaurants, and great improvements to Northstar at Tahoe’s ski terrain, we have an improved destination that our buyers already fell in love with when they were kids.”
Those factors mirror Myrtle Beach, with its 65 miles of sand and more than 100 golf courses: “Although our market is down from last year, our buyers have vacationed here their whole life and we’re a good eight to nine hours closer to the Northeast than Florida,” says J Rod Smith, director of general brokerage at Coldwell Banker Chicora in Myrtle Beach.
Sun, sand, golf or mountains near metro areas may be the no-brainer buys, but there’s another trend among baby boomers — the group driving the vacation-home market — that’s more surprising. “College towns like Madison, Wis., are becoming second-home havens,” says Siroty. “Baby boomers want to go back to that rejuvenation of culture, sport and activity.”
Three prime markets for a second home
Truckee, California (Tahoe)
Population: 16,084
Distance from nearest major metro: Approximately 185 miles from the Bay Area
Median home value: $505,900 (Cyberhomes estimate)
Best recreational opportunities: golf, mountain biking, kayaking, hiking, climbing, snowshoeing, snowmobiling, skiing and snowboarding
Gray’s Crossing (aspirational)
Price: $3,995,000
Size: 4,000 square feet
Rooms: 5 bedrooms, 5 baths
Year built: 2007
Special features: Showcase property built as Sunset magazine’s Idea House. Eco-friendly: all reclaimed wood, solar power, 3,200-gallon cistern.
For more info: Tahoe Home Tours
Snowpeak Way (within reach)
Price: $599,000
Size: 1,660 square feet
Rooms: 3 bedrooms, 3 baths
Year built: 1981
Special features: Golf course setting, new deck, hot tub, granite floors
For more info: Truckee Realty
Breckenridge, Colorado
Population: 2,408
Distance from nearest major metro: 104 miles from Denver International Airport
Median home value: $210,280 (Cyberhomes estimate for Colorado)
Best recreational opportunities: downhill, Nordic and backcountry skiing; fly-fishing; mountain biking, road cycling, golf
Main Street (aspirational)
Price: $1,845,000
Size: 4,130 square feet
Rooms: 5 bedrooms, 5½ baths
Year built: NA
Special features: Three fireplaces, new gourmet kitchen, 480-square-foot carriage house
For more info: Paffrath & Thomas
Shekel Lane (within reach)
Price: $635,000
Size: 2,160 square feet
Rooms: 3 bedrooms, 3 baths
Year built: NA
Special features: Granite countertops and cherry cupboards in kitchen, deck off the master bedroom, slate entry
For more info: Paffrath & Thomas
Myrtle Beach, South Carolina
Population: 24,955
Distance from nearest major metro: Approximately 356 miles from Atlanta
Median home value: $186,710 (Cyberhomes estimate)
Best recreational opportunities: golf, tennis, sailing, yachting, fishing, kayaking, scuba diving
Old Bridge Road (aspirational)
Price: $1,799,000
Size: 4,000 square feet (approximate)
Rooms: 3 bedrooms, 4½ baths
Year built: 1988 (approximate)
Special features: Intracoastal house with 149 feet of deep-water frontage; dock, pier, outdoor fireplace
For more info: Coldwell Banker Chicora
South Ocean Boulevard (within reach)
Price: $519,000
Size: NA
Rooms: 2 bedrooms, 2 baths
Year built: 2008
Special features: Oceanview condo (Sandy Beach resort); pool and lazy river
For more info: Coldwell Banker Chicora