Second-Home Market Surges, Realtors Report

WASHINGTON D.C. - A new study shows sales of second homes surged in 2004, and that investment property and vacation homes make up a significant portion of the overall housing market, accounting for more than one-third of residential transactions, according to a report released Tuesday by the National Association of Realtors.

The new study, based on two surveys, shows that 23 percent of all homes purchased in 2004 were for investment, while another 13 percent were vacation homes. In addition, there was a record of 2.82 million second home sales in 2004, up 16.3 percent from 2.42 million 2003. The investment-home component rose 14.4 percent to 1.80 million sales in 2004 from 1.57 million in 2003, while vacation-home sales rose 19.8 percent to 1.02 million in 2004 from 850,000 in 2003.

?EUR??,,????'??We found excellent results for studies looking at owner-occupied homes, but this is the first time anyone has come up with a methodology for capturing a representative market share for vacation- and investment-home owners,?EUR??,,????'?? David Lereah, NAR's chief economist said. ?EUR??,,????'??In fact, given the size of the market, we can assume that many individual owners have more than one investment property.?EUR??,,????'??

An examination of 2003 data from the Census Bureau shows there are 43.8 million second homes in the United States, including 6.6 million vacation homes and 37.2 million investment units, compared with 72.1 million owner-occupied homes.

?EUR??,,????'??In essence, our definition of second homes has changed with the buyer shift toward investment property,?EUR??,,????'?? Lereah said. ?EUR??,,????'??In examining Census data to determine the number of investment units, we see that second homes are a much larger share than the conventional mind-set of them being mostly vacation homes.?EUR??,,????'??

The typical vacation-home buyer is 55 years old and earned $71,000 in 2003, while investment-property buyers had a median age of 47 and earned $85,700.

For properties purchased between mid-2003 and mid-2004, the median price of a vacation home was $190,000 compared with $148,000 for investment homes. In contrast with the last available full-year price data in 2001, vacation homes have appreciated 12.8 percent from $168,500, and investment homes have risen 25.4 percent from $118,000.