In December of 1996, my husband and I gave each other a beach house. We'd been renting a place in Rehoboth Beach, Delaware every summer for more than a decade and really wanted a place of our own -- not just for the summer, but for fall weekends, New Years's Eve, and general "decompression."

At the time, investment and tax consequences were the furthest things from our minds. Prices seemed stagnant and houses stayed on the market forever. Second homes just weren't moving. To us, daily slaves in the D.C. pressure cooker, buying a beach getaway seemed cheaper than therapy. But not too many people we knew thought we were entirely sane for doing so.

Our no-work getaway was in the newest phase of a condo community called Spring Lake, an end unit townhouse in the second of eight planned buildings. When we decided to buy, we stood on the concrete slab and wondered aloud if anyone else would come along to fill the remaining units.

Enter the Taxpayer Relief Act of 1997 with its capital gains changes. The result -- as Broderick Perkins reported last year -- is that second home purchases surged 16.6 percent and a total of 377,000 single-family second homes were sold in 1999, up 27.4 percent since 1995 according to figures developed by the National Association of Realtors.

Our eight buildings filled like a bus stop at rush hour. Homes that had been on the market for years were snapped up fast.

And the tax code change wasn't the only reason for the second home boom: We "aging baby boomers" contribute to the mix in more ways than one. Maybe we buy a second home for fun now, thinking it could be a great retirement home later.

"With advanced technology, prospects are able to spend longer weekends here without skipping a beat at the office," says Amy Schrader with Jack Lingo, Inc., in Rehoboth. The buyers she sees are "successful business people, the baby boomers who inherited family funds, those who have diversified from the stock market, and early retirees." She adds that, while some buyers may view their beach place as a retirement home, "the initial purchase could be just a 'stepping stone' to a larger, more expensive market."

Boomers would be well advised to plan ahead. Brooke DeCamp Myers, Principal Broker of D.C.-based City Houses, says "given the demographics, folks anticipating buying a second home or moving to another venue upon retirement should consider doing it as soon as they feel confident in their life plan. By thinking ahead of the crowd, they will have more options at less expense."

Clearly baby boomers are heeding her advice, doing advance planning and investing in second/retirement homes early. Pat Fales with RE/MAX Elite Properties in northern Virginia, adds that even now, the surge of second-maybe-retirement homes "has driven demand and prices for homes in great locations over the top."

That brings me back to my experience. Even those like me who weren't thinking "investment" when they bought have benefited.

About a year ago, we began receiving regular mailings from agents throughout our area showing comparable properties that had sold at greatly appreciated prices. As time went by, the mailings became more frequent, adding the message that little was available for sale and our unit could be listed for far more than we ever anticipated. The surprise which prompted this article was the realization that, in less than five years, our little beach house has almost doubled in value.

So, we talked about selling -- but then, where would we move? Better to stay put and maybe buy another little place, this time for the investment of it all. For second home buyers, the beat goes on.

Tracey Meloni, a former Capitol Hill press secretary, purchased many homes in the Washington, DC area before moving away from the Nation's capital.

Published: July 31, 2001

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