Magazine article Mortgage Banking
Vacation Homes Top Record in 2006; Investment Sales Plummet
Second-home sales were a mixed bag in 2006, as vacation-home sales rose to a new record while sales of homes for investment purposes sank, according to a survey by the National Association of Realtors[R] (NAR), Chicago.
NAR's annual Investment and Vacation Home Buyers Survey indicated that the combined total of vacation- and investment-home sales accounted for 36 percent of all existing and new residential transactions in 2006, down from 40 percent of sales in 2005.
The survey further noted that vacation-home sales rose 4.7 percent to a record 1.07 million in 2006 from 1.02 million in 2005; while investment-home sales fell sharply, down 28.9 percent to 1.65 million in 2006 from a record 2.32 million in 2005. By contrast, primary residence sales fell 4.1 percent to 4.82 million in 2006 from 5.02 million in 2005, noted the NAR survey.
Twenty-two percent of all homes purchased last year were for investment, down from a 28 percent market share in 2005. Another 14 percent were vacation homes, up from a 12 percent share in 2005, said NAR.
The drop in investment homes was much greater than the decline in primary residence sales, according to outgoing NAR Chief Economist David Lereah.
"We expected the drop in investment sales, because speculators left the market in 2006--which caused investment sales to fall much faster than the primary market--but the rise in vacation-home sales is based on strong demographic and lifestyle factors, with only modest interest in renting their properties to others," said Lereah.
The typical vacation-home buyer in 2006 was 44 years old, had a median household income of $102,200, and purchased a property that was a median of 215 miles from his or her primary residence; 42 percent of vacation homes were closer than 100 miles and 32 percent were 500 miles or further, noted the NAR survey. …