Boom in the U.S. Vacation and Second Home MarketsThe U.S. homeownership rate has been accelerating for quite some time. According to the U.S. Census Bureau, about 70% of the U.S. population were homeowners as of 2006. This is not surprising given that the housing market has experienced remarkable sales over the last 5 years. The growing homeownership rate is not just seen in the sale of primary residence homes, but also in America''s second-home market.
Factors such as all-time low mortgage rates, increased choices in mortgage products, and appreciating home prices have all contributed to the boom in the primary residence home market and as well as the second-home market.
Buying a second home, be it as an investment or vacation property, had increased significantly among homeowners after the tax law reforms of 1997, which provided favorable tax treatment of capital gains if certain criteria were met. Another contributing factor to the second home boom is that investing in real estate was viewed as a better choice than investing in stock market, since the real estate market outperformed the stock market.
The following is a brief analysis of the U.S. second home market based on a study conducted by National Association of Realtors (NAR) using data gathered in compliance with the Home Mortgage Disclosure Act (HMDA). The data includes information of loan applicants such as demographics, geographic location of property, loan details, etc.
According to the NAR study based on the HMDA data, the purchase loans for second homes has increased markedly from 8.6 % in 2000 to 14.2 % in 2004, at an annual rate of 16 %. Second-home buyers were found to have a higher median income than primary home buyers. Although the median price of second homes ($172,000) was much more than that of primary homes ($170,000), the median loan amount for primary homes was higher than for second homes. The difference in the median home prices can also be attributed to baby boomers who are in their top earning years and are buying homes in expensive locations. With baby boomers looking towards retirement, the second-home and the primary home market will continue to be influenced by them for a few more years to come.
The NAR report reveals that second-home buyers prefer their homes to be close to their primary residences, work places or educational institutions. Some of the fastest growing second-home markets in the U.S are Nevada, Arizona, Utah, Virginia and Idaho, besides the all-time favorites ? Florida and Hawaii. The District of Columbia, Maryland, New Mexico, Washington, and California are the other states that are experiencing a second-home boom now.
If you are considering buying a second home or a vacation property, be sure to seek out the services of a qualified real estate agent to guide you through this transaction.