Thinking about a second home?
In 2001, nearly 6 percent of the record 6.2 million sales of single-family homes were of second homes. According to the most recent data, there were 3.6 million vacant seasonal homes in the third quarter of 2002, up from 3.1 million in 1990 and only 1.7 million in 1980, the U.S. Census Bureau said.
"That category often is cited as the total number of vacation homes," David Lereah, chief economist of the National Association of Realtors, says. "However, we believe that assumption misses many recreational properties that are not vacant." Other census data show there are 9.2 million homes held by owners in addition to their primary residences.
"We can't say with certainty what portion of that number may be for vacation or recreational use, but it appears the size of this market is much larger than earlier believed," Lereah says. But “back-of-the-envelope” estimate indicates there may be as many as seven million vacation homes in the United States.
"Second-home buying has become so significant a part of the marketplace that we decided to survey those buyers apart from the survey of primary-home buyers that we do every two years," he said.
Questionnaires for the survey, conducted last fall, were sent electronically to 93,000 second-home buyers around the country, and 5 percent responded.
"We started out with so little, but now we have a benchmark," Lereah says. "And what we discovered really changed how we look at that market, and our perceptions on how important it is to the real estate market in general." For example, the Realtor group's officials long believed that the median age of the second-home buyer was 61 years. The survey put it at 46.
Other survey findings: The median income of a second-home buyer is $76,000 a year.
About 78 percent of second-home owners use them as vacation getaways and not as investment properties.
"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," Lereah says. "In short, this market is driven by middle-class baby boomers." Methods of financing these purchases changed dramatically after the stock market began wobbling in 2000.
The volatility of the stock market has benefited the second-home market, with many investors looking to resort real estate as a more secure thing.
"When you look at the source of funds for people who bought a second home since 2000, equity in stocks or bonds was used by 16 percent of respondents," Dennis Hanlon, chairman of the Realtor group's Resort Forum, says.
"By contrast, for people who bought second homes prior to 2000, the sale of stocks or bonds accounted for only 7 percent of buyers," Hanlon says. "Clearly, recent buyers were more motivated by a desire to diversify portfolio assets." If the stock market comes back, it could soften the second-home market, Lereah says.
The Internet appears to have been a major influence on the increase in second-home buyers, according to Clark Thompson, chief executive officer of EscapeHomes.com.
"Because the market for second homes is based on distance, people looking for these homes found that they could use the Internet to better advantage than anyone else," Thompson says.
Still, buyers who were surveyed credited the Internet in only 4 percent of second-home purchases.
Most people responding to the survey said they first learned about the home they purchased through a real estate agent or an acquaintance, each cited by 29 percent of respondents. Other sources, in descending order of importance: yard signs, newspaper or TV ads, knew the seller, a builder, and mail advertisements.
Although 48 percent of all second-home owners bought through a real estate agent or broker, 38 percent bought their homes directly from the previous owner, the survey showed.
But nearly half of all for-sale-by-owner transactions involved buyers purchasing directly from someone they knew beforehand, the survey said. The percentage of such transactions for second homes was higher than the 13 percent level for all buyers because many sellers dealt directly with a friend, family member or acquaintance, Lereah says.
An additional 13 percent of buyers dealt directly with a builder.
If middle-class baby boomers are the movers and shakers in the vacation-home market, what they are buying could be their primary homes after they retire, Thompson says.
Most vacation homes are close to the owners' primary residences, a median distance of 185 miles, the survey showed.