Buying by the Beach
Is it time to buy your own place on the sand?
un-in-the-sun time is drawing near, and chances are you’re already thinking about packing the family into a car stuffed with ice chests, snacks and snorkel gear and heading to the beach. Maybe it also crosses your mind that it would be nice to have your own beachfront nest rather than renting someone else’s digs.
Could this be the year you invest in a vacation home? Some reports suggest it’s worth considering.
The National Association of Realtors reported last year that vacation home sales rose 7 percent across the country as some 500,000 properties changed hands – an impressive reversal from trends of previous years.
The nationwide economic recession that stretched roughly from 2007 through ’10 was tough on housing overall but particularly hard on popular vacation destinations, such as Florida. As the housing market there dried up, some areas became a wasteland of foreclosures and failed banks. Making matters worse, lenders took to the hills leaving the few remaining prospective buyers in the lurch.
More recently, signs of recovery have crept in, stirring buyer interest and prompting lenders to ease up on credit terms. The result: The fat inventory of foreclosed vacation homes is thinning.
Realtors association Chief Economist Lawrence Yun says the reversal was bound to occur eventually as the recession created irresistible circumstances. “Investors have been swooping into the market to take advantage of bargain home prices,” he says
Yun said lifestyle and leisure choices generally motivate vacation-home buyers, but last year’s survey showed that 80 percent who jumped into the market simply believed it was a good time to buy. Second-home shoppers from Louisiana were among them.
Tim Shepard, a longtime realtor in one of New Orleans residents’ favorite vacation areas, says a substantial number of locals are among the new owners of vacation homes in the northwestern Florida region known as the Emerald Coast.
“The market is looking a lot like it was before the last big real estate boom in 2004,” the Destin, Fla.-based agent says.
Shepard says the region from Perdido Key to Panama City has benefited in part because economic conditions in the traditional “feeder” states of Georgia, Mississippi, Alabama and Louisiana have been generally better than in the nation at large.
“Louisiana people have always been strong buyers in this market, and they were some of the first to come back and start snapping up some of the good values,” he says.
Texas buyers, too, have shown rising interest in the Emerald Coast, buoyed by a strong oil and gas industry at home, he says.
Shepard says that after the coastal real estate market bottomed, around the fall of 2010, it was just a matter of time before buyers reappeared: “When you look at five years of people not buying, you get a lot of pent-up demand,” he says.
On top of that, home prices had fallen to as little as 40 percent of their peak value.
“Before 2005, a lot of people felt they were priced out of the market, but the housing collapse allowed people to get back in at prices they never thought they would see,” he says.
Shepard recently compiled sales figures for the resort community called WaterColor, near Santa Rosa Beach, a popular second-home spot for Louisiana residents. During the first half of 2012, sales in Watercolor jumped 20 percent compared to a year earlier, he says. Sales of newly built homes represented almost a third of the total purchases.
As the inventory of unsold properties declined almost to the 2004 level, prices began to stabilize, Shepard says, noting that ’12 produced the first increase in average sale prices in the community in eight years. He pegs the current average price for Watercolor homes at $385 per square foot.
Shepard says the gradually improving economy and continued low interest rates likely will keep prospective buyers interested in the upper Gulf Coast, but he predicts that shopping for bargains will become harder because many of the best values are gone.
“The first part of the recovery was in houses, because it was easier to get financing for houses,” he says, noting that beachfront condominiums came next. “Probably the last opportunity I’m seeing right now, as far as prices still lagging the market, is in harbor-front boating-type properties,” he says.
Chances are, buyers won’t be put off by an increasingly tough search for great buys. Analysts say that lifestyle objectives still are the big drivers in vacation home sales, so the idea of paying a little more than they had planned on won’t necessarily turn serious shoppers away.
In the Realtors association survey, 82 percent of vacation-home buyers said their primary intention was to use the property themselves for vacations or as a family retreat. About 30 percent said they would use the property as a primary residence in the future and only 22 percent planned to rent to others.
Based on the survey’s profiles, the typical buyer of a vacation home was 50 years old, had a median household income of $88,600 and purchased a property that was a median distance of 305 miles from the primary residence, with 35 percent of purchases being within 100 miles of home.
Buyers planned to own their recreational property for about 10 years, according to the survey.
Facts About Vacation Homes
The National Association of Realtors Vacation Home Buyers Survey 2012 examined data provided by people nationwide who purchase existing and newly constructed vacation properties within the previous year. Here are some highlights from the survey findings:
• Vacation-home sales rose 7 percent to 502,000 sales, up from 469,000 the previous year.
• Vacation-home sales accounted for 11 percent of all existing and new-home transactions.
• Forty-two percent of vacation-home buyers paid cash.
• Thirty-nine percent of vacation homes purchased were distressed (in or approaching foreclosure) properties.
• The median down payment was 27 percent of the total price.
• The median vacation-home price was $121,300, down 19 percent from the previous year.
• The typical buyer purchased a vacation property that was a median distance of 305 miles from the primary residence; 35 percent were within 100 miles and 37 percent were more than 500 miles from home.
• Sixteen percent of vacation buyers purchased the property for a family member, friend or relative to use.
• Forty-two percent of vacation-home purchases were in the South.
• The association’s analysis of U.S. Census Bureau data shows there are 8 million vacation homes in the country, compared with 75.3 million owner-occupied homes.