A new survey of the second home market reveals a large share of buyers, gobbling up seconds as investment properties instead of as vacation or retirement homes, representing what could be a quantum shift in the market.
The survey may be too small to truly quantify trends in the second home market, but it does reflect trends found in other surveys.
The EscapeHomes.com Second Home Buyer survey of visitors to the second home portal netted only 363 responses, but found the greatest share of prospective second home buyers, 29 percent, looking for investment properties. The survey said 26 wanted a retirement home, and only 18 percent were looking for a vacation home. A year earlier, second-home seekers were more evenly split: 25 percent sought a second home as an investment, 25 percent wanted one for retirement, and 24 percent sought a vacation home.
It couldn't be immediately learned why neither survey accounts for 25 percent of the respondents.
"Homes (as investments) have done well in people's minds for two reasons, It's an asset to hold onto. You walk in with the expectation that you are going to be here, and that allows for appreciation and compounding to take affect," said Jeff Lyons, general manager, of RealEstate.com in Charlotte, NC.
"Also you finance the purchase with leverage. If you get a 10 percent return (in appreciation) over a couple of years with 20 percent down that's a 50 percent return on your investment. Still, if it's an investment decision, you need to run the numbers and make good investment decisions," Lyons added.
The benchmark "2002 National Association Of Realtors Profile of Second-Home Owners", said many more, 51 percent, of second home buyers used their second home primarily as a vacation getaway, 18 percent planed to retire in it, and a number similar to EscapeHomes.com's findings, 31 percent, (16 percent diversifying investments and 15 percent renting out homes for income) could be considered investors.
NAR later found growth in the number of second-home property investors -- from 20 percent in 1999 to 37 percent in 2002, and in it's "2003 Profile of Home Buyers and Sellers", based on strong second home purchases in metropolitan areas, found that most second home purchases in the first quarter that year were investment properties.
Last summer, "The Second Home/Vacation Property National Study" conducted for Altamonte Springs, FL-based Centex Destination Properties (CDP) by American LIVES, Inc., of Carmel Valley, CA found that even more, about two-thirds of those surveyed, were looking for properties with investment potential.
Why such disparity?
It's at first difficult to extract sound second home statistics from the greater housing market, and it's even tougher to quantify the second home market's segments for several reasons.
Studies take different approaches to breaking down buyers' reasons for acquiring second homes because buyers likely use their homes in different ways at different times. Purchasing a second home as an investment property doesn't preclude the buyer from vacationing in it or later moving in after retirement. Likewise, buyers who buy properties with vacation plans in mind, may find that it can pay for itself if it's rented out for as little as half a year, say, during the tourist season.
"In general, people who own second homes prefer not to open them to strangers. But if you can get $3,000 a week in high season, you can learn to love vacation renters quite quickly. Lock your personal possessions in the owner's closet and adjust how you think about your property," said Alfred Glossbrenner, who along with his wife and Emily produced the book/CD package, "How to Make Your Vacation Property Work for You!".
The breakdown of second home uses can also vary by region.
"The second home market is really fragmented among those who want to use it for recreation, eventual retirement, and as an investment. And the fragments are different sizes in different areas of the country. In the Midwest and West, people are more willing to travel great distances than up here in the Northeast," said Dan Hurley, editor of the 2nd Home Journal published in Johnsbury, VT.
Also, the second home buying boom, largely a product of tax law changes, the growing baby boomer population and the movement of investments from Wall Street to Main Street is a relatively new phenomenon.
Faster growth in the second home market began only within the past 10 years before the last recession, during the nation's longest economic expansion on record, when technology industry gave rise to the so-called New Economy.
"Certainly, some of this growth is due to an increased familiarity and comfort level with the Web and the internet among owners of second homes. But we also think it is the result of more and more property owners realizing that their second homes are under-performing assets," said Glossbrenner.
Escape Homes also found:
- Fifty-eight percent of the respondents said the internet was their primary source for researching real estate purchases, followed by working with a real estate agent at 11 percent.
- Only 29 percent of the respondents have visited their desired second home location two or three times. In 2003, 40 percent of the people had done so.
- More than a third of the respondents were willing to fly to their second home destination, compared to 25 percent a year earlier. Fifty-seven percent preferred to drive, down from 65 percent.
- Sixty percent of respondents said they planned to buy a second home more than 500 miles away from their primary residence.