The vacation home market is booming with new life, and resort towns all over the U.S. are enjoying the spoils of this market upturn. In fact, according to an April 2014 report from the National Association of Realtors, annual sales of vacation homes jumped nearly 30 percent to a little more than 717,000 homes.
Considering that vacation home sales represent 13 percent of the total housing market, their highest share since 2006, it’s understandable why many industry insiders and prospective home investors are pleased with these rising trends.
Vacation Home Hot Spots
As with most real estate, success in the vacation and second home market is driven, in part, by location. Many of the nation’s most popular and more expensive destination towns that have been struggling for the past six years are once again bursting with tourist activity and high-end home sales.
“Buyers of primary residences usually purchase their home because of a wish to be a homeowner or as the result of a job relocation,” states Marcy Oglesby, Loan Officer with Guardian Mortgage, “whereas buyers of vacation and investment properties are more often motivated by other factors such as real estate hot spots, market trends and long-term investments for retirement.”
Scottsdale, Arizona and Taos, New Mexico are topping the charts as two of the most popular luxury vacation home destinations. With the flexibility of activity offerings, as well as high-end retail and spa amenities, New Mexico offers luxury vacation options.
With the combination of natural beauty and luxurious conveniences, vacation and retirement homes sales in New Mexico, Colorado, Florida and Arizona continue to be the hot spots of real estate activity.
Reasons Why We Buy
Real estate is one of the few financial transactions seen as a personal investment. Not only is it a large commitment, but for many, homes and vacation homes are where hours are spent as families, building memories and watching our children grow.
What drives each of us to make vacation or second home purchases varies from homebuyer to homebuyer. Here are a few of the most common reasons as found recently by the National Association of Realtors:
To use for vacations or as a family retreat:
- Vacation Properties – 87%
- Investment Properties – 29%
To use as a principal residence in the future:
- Vacation Properties – 31%
- Investment Properties – 9%
To diversify investments/good investment opportunity:
- Vacation Properties – 28%
- Investment Properties – 34%
To rent to others:
- Vacation Properties – 23%
- Investment Properties – 50%
For the tax benefits:
- Vacation Properties – 13%
- Investment Properties – 17%
Second Home Mortgage Loan Know-How
With the passing of new home mortgage lending regulations in January 2014, lenders now review a borrower’s entire financial picture prior to making a lending decision, which has been seen as invasive and excessive in the eyes of many consumers. In addition to the change in down payments, the new provisions require that a borrower’s total debt payment cannot exceed 43 percent of their pretax income.
To assist with the qualification for a second home loan under the new regulations, many lenders are guiding their potential homebuyers to consider making a down payment larger than 20 percent. This typically drops the monthly payment considerably and allows for many second-home buyers to qualify.
When considering a second home mortgage, prepare by reviewing your credit history, calculating your debt-to-income ratio and use online mortgage calculator tools to assist you in finding out what you’ll qualify for before you speak with a Mortgage Loan Officer.
Marcus McCue |
EVP & CBDO