Second Home Buyer's Guide
Vacation homes in popular areas saw their valuations rocket with the broader residential market during the real estate boom. Now that the market has cooled and the investment speculators have gone home, buyers can expect to find a wide selection and prices that are flat or slightly lower -- at least in some regions.
While those factors have tilted the balance in favor of prospective buyers, notably in areas with a glut of new condos, prices in many of hottest markets haven’t seen remarkable declines from their highs. Consequently, beachside bargains may be scant – and those seeking deals may have to travel to slightly less fashionable destinations to find true values. But for would-be buyers yearning to relax at their own retreat, rather than to turn a quick profit, conditions have improved. Interest rates also remain favorable.
“During the height of the boom, there was no inventory and what was available was overpriced, so you were apt to compromise on the home itself and the price you paid,” said David Hehman, president of EscapeHomes.com, an online vacation-home marketplace. Now, "it's a great time to buy (because) there's more inventory than ever."
Though vacation home sales declined precipitously in some regions, pricing didn’t necessarily follow suit. For instance, in California, where second-home purchases plummeted 37% last year, the median price paid still rose nearly 11% to $400,000, according to DataQuick, a San Diego firm that tracks national home sales.
Buyers have less bargaining power on the vacation home market because homeowners can typically afford to let their properties sit for longer periods. Instead of slashing the price, they can simply enjoy it for another season or rent it out, brokers say.
Pricing trends vary tremendously across geographies and terrain: beach houses tend to be pricer than mountain homes, but a ski chalet in the Pocono Mountains is far more affordable than a mountainside retreat in Aspen.
We took a look at market conditions in several vacation spots.
Unless you’ve found your dream vacation home at a price that fits your budget, buyers should feel no pressure to quickly snap up the relative bargains in Southern Florida. Yes, inventories are up and prices have stabilized or declined in some pockets of the market. Some experts, however, believe prices could erode further.
“In the condo arena, we could see a further decrease in pricing because of the sheer volume of condo projects coming on the market, particularly in Miami-Dade County,” said David Dabby, a real estate analyst based in Miami, where the median condo is priced at $265,000 while the median single family home is $390,000. “There are so many projects coming on the market (there) in 2008, that I forecast either a significant correction or total disaster.”
“You can get an advertised deal but it’s still twice what it was a few year ago,” Dabby added. “Florida has gotten California expensive.”
The price increases, coupled with exorbitant hurricane insurance and property taxes, has many second-home buyers looking further north, to parts of Tennessee, Georgia, and the Carolinas, brokers say.
On Holden Beach, N.C. -- a nine-mile island component of the Brunswick Islands, which sit about 35 minutes south of Wilmington -- sales activity has tapered off over the past 18 months, says Alan Holden, who owns a property management company and Remax at the Beach in Holden Beach. “But interestingly enough, property owners are not drastically reducing their prices,” he said.
The median price for a waterfront home is about $1 million; the same beachside retreat would’ve fetched a third of that in 2003, he said. Less expensive homes, still minutes from the beach and near a plethora of golf courses, can be found on the mainland starting at about $300,000.
On the Mendocino coast in northern California, vacation home sales started to show signs of life just last week after a 21-month slowdown. During that period, properties would sit on the market for six or eight months because sellers were loath to lower asking prices. After a slight softening in prices earlier this year – the median home price is about $600,000 or $900,000 on the waterfront -- baby boomers have come back to the market, said Greg Menken, owner of Remax Shoreline Properties in Fort Bragg, Calif.
“Houses are starting to move,” Menken said. “Inventories are quite high at the moment, but prices aren’t being negotiated lower.”
Since prices have appreciated greatly during 2005, some folks are beginning to seek out vacation retreats in Washington state in towns such as Port Angeles, Sequim and Port Townsend, he added, as well as Klamath Falls, Ore.. Some buyers have also looked to areas that were considered out of the way – with less desirable weather -- such as in Lassen and Modoc counties, both in California.
The conditions in Mendocino are similar to those in the Hamptons, the luxury beachside hot spot nestled on Long Island’s East End. Sellers aren’t budging on price -- the median home is in the $875,000-to-$925,000 range -- but there’s certainly more homes to chose from, says Diane Saatchi, a broker with The Corcoran Group in East Hampton, N.Y.
“I see sellers eager to sell, but they are not anxious or desperate so they aren’t lowering their prices, Saatchi said, adding that they’ll simply use it for another season or rent it out. “With second homes, a lot has to do with discretion rather than need.”
The highest end of the Hamptons market – where homes start at $10 million -- is “extradonarily strong,” she adds.
Property values nearly doubled during the boom, but sales activity has dropped about 40%
over the past year and a half, said broker Deb Howard, who sells on Tahoe’s south shore. The median home price on Tahoe’s California side (south shore) was $475,000 in March, down about 2% from last year, she said, and inventories are quite high. Howard expects to see price declines of about 5% to 10% over the next year before moving higher.
“The message seems to be this might be a good time to start looking,” she added.
Door County, Wis.
Known as the Cape Cod of the Midwest, Door County is a peninsula surrounded by Lake Michigan and the bay of Green Bay. This lakeside community tends to be more stable than the coastal markets, though, like the rest of the country, it has experienced a slowdown over the past 18 months, said Tad Gilster, a broker with Coldwell Banker Door County Horizons.
“Buyers have more choice than they have in a long time,” Gilster said, adding that properties range from small cottages starting at $200,000 to shorefront homes beginning at $400,000. “I would call it a modest buyer’s market. We haven’t seen prices declining, but buyers can find things for about what they could a year or two ago, with a little more choice.”
After experiencing a tremendous run-up in prices over the past four years, Ken Libby, owner of Stowe Realty, in the ski resort town of Stowe, Vt., said buyers now have a window of opportunity. While prices rose about 14% in 2006, he said they rose at a slower clip than the three years prior.
“It’s become a buyer’s market,” said Libby, adding the average home price in his market is the high- $400,000’s and inventories are higher. “Price adjustments are where they need to be, rates are (still relatively low) and the buyers are starting to see that.”