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Investment, vacation home purchases spike dramatically

With the growing population, investment and vacation home sales are increasing and the National Association of Realtors forecasts that there will be continued growth in coming years.

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Buyer survey results are in

According to the National Association of Realtors’ 2012 Investment and Vacation Home Buyers Survey, investment home sales surged 64.5 percent in 2011 from 2010, while vacation home sales rose 7.0 percent, and owner-occupied purchases fell 15.5 percent. Vacation home sales accounted for 11.0 percent of all transactions in 2011, up only 1.0 percent for the year, while investment sales surged dramatically to 27 percent, up 10.0 percent from 2010.

NAR Chief Economist Dr. Lawrence Yun said investors with cash took advantage of market conditions in 2011. “During the past year investors have been swooping into the market to take advantage of bargain home prices. Rising rental income easily beat cash sitting in banks as an added inducement. In addition, 41 percent of investment buyers purchased more than one property.”

Investors to absorb foreclosures hitting market

Dr. Yun said the shift in investment buyer patterns in 2011 shows the market, for the large part, is able to absorb foreclosures hitting the market.

“Small-time investors are helping the market heal since REO (bank real estate owned) inventory is not lingering for an extended period. Any government program to sell REO inventory in bulk to large institutional companies should be limited to small geographic areas. Even where alternatives are needed, it’s best to rely on the expertise of local businesses, nonprofit organizations and government,” Dr. Yun said.

Cash buyers in the market

According to the survey, all-cash transactions are becoming the common way for investors to buy investment and vacation homes with roughly half of all investment buyers paying cash in 2011 and 42 percent of vacation home buyers paying cash. Dr. Yun points to tight credit conditions for the decline in owner-occupant purchases.

Half of all investment home purchases in 2011 were distressed homes, as were 39 percent of vacation homes. The median investment home price in 2011 was $100,000, up 6.4 percent over the year, while the median vacation home price was $121,300, down 19.1 percent.

“Clearly we’re looking at investors with financial resources who see real estate as a good investment and who aren’t hesitant to use cash,” Dr. Yun said.

Dr. Yun also pointed out that for investment and vacation home buyers that used mortgage financing, the median downpayment was 27 percent in 2011.

Buyer demographics

The typical investment home buyer in 2011 is 50 years old, earns $86,100, and usually invested within 25 miles of their primary residence.

The typical vacation home buyer is also 50 years old, has a median income of $88,600 and purchased a property within 305 miles of their primary home. Although 37 percent purchased vacation homes over 500 miles away, 35 percent stayed within 100 miles.

Flipping is down

The 2012 study reveals that buyers plan to own their recreational property for a median of 10 years.

“The share of investment buyers who flipped property remained low in 2011, and many of those homes likely were renovated before reselling,” Yun said. Five percent of homes purchased by investment buyers last year have already been resold, up from 2 percent in 2010. The typical investment buyer plans to hold the property for a median of 5 years, down from 10 years for buyers in 2010.

Most (82 percent) of vacation home buyers said the primary reason for buying was to use the property themselves for vacations, and while 32 percent plan to use the property as a primary residence in the future, only 22 percent plan to rent their property to others.

Half of investment buyers purchased in order to generate rental income, and 34 percent indicated they wanted to diversify their investments or saw a good investment opportunity.

Fully 16 percent of vacation buyers and 14 percent of investment buyers purchased the property for a family member, friend or relative to use, often for a son or daughter to use while attending school.

Hot spots for vacation home and investment purchases

The South is very popular for investors and vacation purchases, accounting for nearly half of all 2011 purchases.

Fully 42 percent of vacation homes purchased were in the South, 30 percent in the West, 15 percent in the Northeast and 12 percent in the Midwest; 1 percent were located outside of the U.S.

Additionally, 42 percent of investment properties were in in the South, 23 percent in the West, 17 percent in the Midwest and 15 percent in the Northeast.

Positive outlook for second home purchases

Eight out of 10 second home buyers said it was a good time to buy and nearly half of investment buyers said they were likely to purchase another property within two years, as did one-third of vacation-home buyers.

The study anticipates that with the growth patterns of the American population, second home sales will increase. Dr. Yun noted, “Given that the number of people who are in their 40s is somewhat larger than the 50-somethings, the long-term demographic demand for purchasing vacation homes is favorable because these younger households are likely to enter the market as their desire for these kinds of properties grows, and individual circumstances allow.”

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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