In seaside Ocean City, MD, where 91 percent of the homes are vacation home properties, owners were buoyed by the prospect of reduced property taxes after assessed values dropped 36 to 45 percent over the last three years, according to county officials.
Scouting the slopes in Colorado's ski resort areas of Aspen, Beaver Creek, Steamboat and Vail will uncover some home prices in the toniest areas still holding steady, but overall sales are down by about 40 percent, according to a University of Colorado's real estate center.
In Maui, both home prices and sales are down about 25 percent each, according to the island's real estate association.
That's only the beginning. Lower prices and less competition are the tip of the iceberg-sized list of factors that make it a good time to consider a vacation home buy.
"In many vacation markets, you can pick up a beach condo or a mountain cabin at a decent price. In some markets, homes are back to 2000 prices," said vacation home guru Christine Karpinski, director of Owner Community for HomeAway.com (an online vacation home rental Web site).
She says a host of market conditions have converged to make buying a second home a smart move right about now.
Take the stock market. Please.
"Stock market woes have always pushed people to look for alternate investments, and real estate is a consistent stronghold," she says. "Yes, home values are down right now but they have always rebounded. I wouldn't recommend buying a second home with the expectation of flipping it for a quick buck, but if you hang onto it for a while -- and better still, turn it into a vacation rental property -- you'll make a nice profit," Karpinski says.
Interest rates are cooperating.
On Dec. 24 Freddie Mac's Primary Mortgage Market Survey revealed a 30-year fixed-rate mortgage (FRM) average of 5.14 percent. The rate hasn't been lower since Freddie Mac started the survey in 1971.
"Rates have been reasonably low for awhile, following earlier rate cuts toward the beginning of the year. That's good news for anyone who's in the market for a mortgage," Karpinski added.
The pressure of bidding wars is off.
"Housing bubble or no housing bubble, you're not going to get bargain basement prices on, say, a cottage right on the ocean—but if you're willing to buy a few rows back, you'll likely find that prices have fallen substantially," notes Karpinski.
"Because houses aren't flying off the shelf, there's less pressure on you to make a quick decision. You can afford to take your time, do your research, and refine your plan," she added.
Vacation rental demand is on.
Economic pressures on travel budgets are forcing those who once traveled abroad to stick closer to home. To further save travel dollars, domestic travelers want the most bang for their getaway bucks. Vacation homes provide all the comforts and options of home (eating in, game rooms, wirelessness, etc.), often at a per-person rate that's cheaper than a hotel.
Karpinski says, "Vacation homes tend to be less expensive than hotel rooms. This is especially true if you're traveling with extended family or a group of friends. Not incidentally, in many areas of the country, rental demand exceeds supply. The Sunshine State (Florida) is a prime example. Buy a vacation home in a market like Cape Coral, Daytona, Destin, Fort Lauderdale, Indian Rocks Beach, Kissimmee, Madeira Beach, Orlando, Panama City Beach, Sanibel Island, West Palm Beach, or Windsor Hills, and you can't lose."
The weak dollar makes American destinations attractive to European travelers and others holding stronger currencies. Also, business travel continues to generate vacation rental income -- especially when foreign business associates come calling.
"It's a far more comfortable option; plus many companies work out deals with homeowners whereby they can get volume discounts," said Karpinski
A vacation home can pay for itself.
When your monthly mortgage payment is less than or equal to one peak week rental, twelve weeks of rental will cover your mortgage payments for the entire year. Other costs, including bills for your phone, power, cable, and association dues, may be paid out of your earnings from approximately five off-week rentals, Karpinski says.
The calculations don't consider the added cost of a property manger you may need if you are not a do-it-yourselfer.
Despite the convergence of positive factors pointing to an opportunity to buy a second or vacations home, the fundamentals still apply. Strong credit, low debt, high savings and other assets are a plus.
"If you have strong credit, you can find a lender who'll work with you. Also, don't rush into a decision. It's more important to take your time, make sure the property is right for you," Karpinski says.