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Second Home Buyers Prefer A Playhouse

Written by on Wednesday, 20 November 2002 6:00 pm
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Despite recent reports indicating real estate's heightened profile as an investment vehicle, especially to help plug the drain on stock market portfolios, most second home buyers move in for the sheer fun of it.

Fifty-one percent of second home buyers said they use their second home as a vacation getaway, 18 percent plan to retire in it, 16 percent use it to diversify investments, and 15 percent rent it out for income, according to "The 2002 National 2002 National Association Of Realtors Profile of Second-Home Owners".

"We've found that the decision to purchase a vacation home is purely emotional -- nobody, anywhere needs a second home. As one gets older and more prosperous, the vacation home becomes a blend of idyllically remembered family vacations overlaid with the desire to be in familiar and personal surroundings," said Lil Miller-Fox co-founder of PrivateCommunities.com, a Vero Beach, FL Website that showcases luxury retirement communities.

"This is consistent with the NAR survey that supports the notion that investment considerations aren't the primary motivators for second-home buyers," Miller-Fox added.

The percentage of those who buy financial shelters, however, is in the same neighborhood as those who buy a play house -- 31 percent of those surveyed are using second homes as an investment or income-producing vehicle.

Thirty-four percent of second-home buyers in the last two years were more likely to be planning to purchase an additional home as a result of recent stock market declines, while only 18 percent of earlier buyers made such an indication. Among people who said an additional home purchase in the next two years was possible or very likely, nearly 40 percent said the recent stock slump increased the likelihood of that purchase, while only 15 percent said it was less likely.

"When you look at the source of funds for people who bought a second home since 2000, equity in stocks or bonds were used by 16 percent of respondents," said Dennis Hanlon, chairman of NAR's Resort Forum.

"By contrast, for people who bought second homes prior to 2000, the sale of stocks or bonds accounted by only 7 percent of buyers. Clearly, recent buyers were more motivated by a desire to diversify portfolio assets," Hanlon added.

The second-home survey, was conducted jointly in October this year by NAR and EscapeHomes.com, a San Francisco-based online portal to second home listings and Resort Specialists.

The joint snail mail and email survey, sent to 93,000 consumers who owned a second property, generated 3,101 respondents.

"This is a timely study in the sense that it is an industry poised for growth because of a huge number of factors that are converging and compelling that growth," said Ken Brunt, vice president of EscapeHomes.com.

Factors include the growing population of aging baby-boomers retiring with record levels of equity income, tax-free profits of up to a half million dollars from the sale of homes, other investments performing poorly and a saber-rattling nation on the brink of war compelling home buyers to seek the security of reclusive retreats.

The study profiled the typical second home buyer as someone who is typically 61 years old, has owned the property for nine years, earns a household income of $76,900, is married and purchased the property for recreational use.

"The idea of a family retreat is important to many second-home owners, cited by 57 percent of respondents, but there are other lifestyle and investment considerations that motivate buyers. In short, this market is driven by middle-class baby boomers," said David Lereah, NAR's chief economist.

Including property, demographic, lifestyle and investment trends, the survey of second home owners found:

  • Seventy-eight percent own vacation homes rather than investment-only property.

  • Vacation-home owners prefer to be close to where they spend recreational time or to natural attractions. Seventy-six percent wanted to be near an ocean, river or lake; 38 percent close to the mountains or other natural attractions, and 37 percent in a specific vacation area.

  • Thirty-three percent of investment-home owners prefer their property to be near their primary residence; 21 percent want to be close to family members and 10 percent want to be near a job or school.

  • For leisure activities of interest to vacation-home owners, 69 percent like beach, lake or water sports; 44 percent like boating; 36 percent prefer hunting or fishing; 21 percent golf; 21 percent winter recreation; 16 percent biking, hiking or horseback riding; and 4 percent tennis.

  • Vacation-home owners spent a median of eight weeks per year at their property, while over half of all investment owners never used that home. Also, 55 percent of investment owners rented to others for at least six months a year.

  • Vacation homes are a median 185 miles for owners' primary residence, and most owners use a car to travel to their property, but one third of vacation homes are more than 500 miles way, and one third less than 100 miles.

  • The median price of second homes rose nearly 27 percent between 1999 and 2001 as sales rose from 264,000 units in 1991 to 359,000 units in 2001.

  • Fifty-six percent of second home buyers lender financed their purchase, compared with 94 percent of all home buyers. Other sources of full and partial financing for second homes included savings (49 percent); equity from an existing home (10 percent); stocks or bonds (9 percent); inheritance (7 percent); gifts (5 percent); and the sale of personal property (2 percent).

  • Only six percent of all home sales each year are second homes.
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      About the author, Broderick Perkins

    Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.
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