Dive Brief:
- The National Association of Realtors 2016 Investment and Vacation Home Buyers Survey found that while vacation home sales — still at their second highest level in almost 10 years — have slowed, purchases of investment homes have risen for the first time in five years.
- Sales of vacation homes in 2015 — which represented 16% of all sales — were down 18.5% from 2014 to 900,000. However, investment sales — which represented 19% of all volume — shot up 7% to 1.09 million, which the NAR said is the highest number since 2007’s volume of 3.93 million.
- The 2015 median prices for both types of homes mimicked the overall market, with the median vacation home price up 28% from 2014 to $150,000, and the median investment home price up 15.3% to $143,000.
Dive Insight:
NAR Chief Economist Lawrence Yun said retiring baby boomers are still driving the demand for second homes but that overall sales volume, while still the highest since 2006, started to wane.
"The expanding pool of buyers amidst a dwindling number of bargain-priced properties led to tighter supply and fewer sales and caused the price of vacation homes to rise," Yun said in a release. "Furthermore, the turbulence that hit the financial markets the second half of the year likely seized some would-be buyers' available cash." Yun added that vacation properties in the South (47% of all vacation sales), especially in Florida, drove prices higher in 2015, which might have cut those with less cash to spend out of the market.
The NAR survey demonstrates that issues of rising prices and tight inventory are affecting more than just the starter-home market, as higher-end vacation home sales are facing the consequences as well.
As for investment properties, Yun said that although there are fewer distressed properties — which are a popular choice for investors — on the market, home prices and rents on the rise, and buyers are looking to reap the benefits of growing value and the ability to rent out the unit.
The latest S&P/Case-Shiller U.S. National Home Price Index revealed that year-over-year home sales rose from 5.3% in December to 5.4% in January — twice the rate of inflation and wages.