Mortgage Business

Vacation Homes -The Real Estate Trend of the Decade

Beach homesThe real estate market has been trending upward since the recession. No market has been heating up faster than the vacation home market. As the baby boomers get closer to retirement age, they are moving to purchase vacations homes, many of which will become their retirement homes in the future. According to the National Association of Realtors, 2014 was a record year for vacation home sales, eclipsing the previous record set in 2006 at the height of the real estate boom. 2015 numbers will be released in April of this year by NAR. Vacation home sales actually soared over 50% higher from 2013. At this point, one in five sales nationally are for vacation homes.

Some advice for those about to become part of this hot demographic trend? Here are a few important considerations for you to regard while you are dreaming about your retirement at the beach or in the mountains:

How convenient is your paradise to access? If it is within a coastal community and a hurricane is on the way, can you get there quickly?

  • Is this your vacation spot or an eventual retirement home? If retiring to this spot eventually, there other considerations such as pet policies and the location of your family. According to the NAR, one-in-five vacation home purchasers plan to retire in the home they purchase.
  • The tax benefits. Interest on second homes are generally deductible and the tax law makes selling homes without capital gains much easier. You should consult your tax advisor before moving to purchase a vacation home.
  • Consider insurance costs. More remote locations which are exposed to natural hazards such as hurricanes must be factored into the carrying costs of the property.
  • Spend time within the area first. Never purchase unseen properties. A home is like a marriage—divorce can be costly.
  • Look at the resale market. As hot as the vacation market has been, some areas do not move as quickly as others —especially remote locations. If you are purchasing for your own tastes, instead of the general public—make sure you have the ability to make a long term investment.
  • Consider the financing options. Second homes are easier to finance than investment property that are full-time rentals. Many times, down payments can come from equity in your owner-occupied residence without touching your liquid savings or retirement accounts. You should consult with a mortgage advisor, as well as your financial advisor, to consider the options.
Why Is the Vacation Market Hot?
  • Demographics-baby boomers are moving closer to retirement and have equity in their homes.
  • Access to resort areas have improved.
  • Lending rules have eased and rates are low.
  • The stock market has increased equity for millions, but future returns are not guaranteed.

With rates low and so many financing options available, it appears that the demographics of the nation will continue to support vacation home sales for the foreseeable future. Doesn’t sipping wine and watching the sunset over the beach, the mountains or a lake sound nice?

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