Second Homes Make Sense for Many in the Current Market

 

 

If you’re a late “Boomer” or a “Gen X” or “Gen Y’er,” you’re likely looking for a place to position assets given the extreme volatility of U.S. equity markets and paltry returns of money market instruments and other safe havens.

            Real estate, even through the market downturn, has long been considered a conservative, long-term strategy to growing wealth. Better yet, lower home prices across America and record-low mortgage rates have created an historic buying opportunity for real estate including second/vacation homes. It’s a “ground floor” opportunity that comes with doors, windows, a roof and potential for many great moments and memories.

Long-term demand for second homes looks strong, as there are large numbers of people in the prime buying years for second/vacation homes. Late Boomers? There are roughly 40 million of these potential second-home buyers, and another 85 million between the ages of 30 and 49. For all, second homes suitable for play now and retirement later have significant appeal.

U.S. vacation-home sales rose 8% last year to 553,000, according to the National Association of Realtors (NAR). Though well below a 2006 peak of 1.067 million sales, it represents the first gain in three years. Median price for a vacation home increased 12.6 in 2009, perhaps reflecting movement higher-end markets, said NAR Chief Economist Lawrence Yun.

How you use a second home is up to you, but if it’s something you’ve been considering, now is the time to get the information you need to make an informed decision. A qualified real estate professional can help guide you through financial considerations, assist you in finding the right community and even refer you to a resort property specialist for the destination of your dreams. Your real estate professional may be able to get you the information and advice you need to use the equity in your current home to finance the down payment on a second home, for example.

For many, a second home in a vacation or resort area can be an income property when not in use. Once again, a real estate professional will help you consider property management options that can be a crucial financial factor as well as important to peace of mind.

Some of the best locations are not more than two to three hours away from major metropolitan areas by car or plane. For example, Bostonians gravitate to Cape Cod. New Yorkers favor the Hamptons. San Franciscans retreat to Lake Tahoe and Angelenos head for Palm Springs or Big Bear. Many people who live in the West also have second homes there. Yet, the biggest feeder market for second homes in the South are buyers from the Northeast.

What makes a second home location ideal? Natural beauty is great, but don’t forget about cultural and social resources, as well as first-rate golf, tennis and other popular sports facilities.

Second homes are a discretionary purchase, and everyone wants to feel secure in their environment. That’s why gated and guarded residential communities will continue their appeal. And locations such as Sante Fe, New Mexico, and Coeur d’Alene, Idaho, which are removed from most urban problems, continue to be attractive.

Nevertheless, you will likely get more enjoyment out of a property you can get to quickly and can use frequently. Since you know this area, chances are you’ll make a better real estate investment closer to home. And be sure to look at each property with an eye toward tomorrow, because the vacation homes likely to appreciate the most are the ones that Boomers can play in today and retire in tomorrow.

Once you’ve narrowed your search to two or three communities that fit your price range and lifestyle, make comparisons of price and sales activity. Your real estate professional can help you determine which communities are most sales-worthy at present, and which are more likely to continue to be.

There are many factors involved in selecting the right community for you and your family. Discuss your options with your real estate professional. This will provide the information he or she needs to help you find property listings to tour. Remember, a targeted approach to house hunting is less time consuming, less expensive and more efficient.

The Premier Team can be reached at 860-489-1772. Prudential Premier Homes  is an independently owned and operated member of The Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.