More consumers are feeling richer and that’s fueling a stronger vacation home market, shows the National Association of REALTORS®’ newly released 2019 U.S. Vacation Home Counties Report.
“As of 2018, household net worth reached an all-time high of $100.3 trillion—that’s nearly double from a decade ago when wealth declined during the recession,” says Lawrence Yun, NAR’s chief economist. “Some of this tremendous growth in wealth, although concentrated, increased demand for vacation homes.”
Most home buyers still purchase a home with an intent as a primary residence, but a growing number of owners are also looking to purchase a second home. They want to use the second homes as a family vacation spot, as a tenant rental income generator, as an equity builder, or to plan for retirement and one day turn the home into their primary residence, NAR’s report shows.
These purchasers are willing to pay the higher price tags, too. Between 2013 and 2018, the median sales price in vacation home counties rose at a slightly higher pace of 36% compared to the pace of increase for all existing and new homes sold (which was at 31%, for comparison). The counties seeing the highest price increases during that five-year period were Pike and Monroe counties (in Pennsylvania); Price and Washburn counties (in Wisconsin); and Nantucket (in Massachusetts).
“Some people may visualize the common popular vacation destinations in the U.S. when considering a vacation home, such as counties in Florida or California,” says Yun. “And although those locations have their share of vacation properties, we see that some homeowners prefer some of the other counties, including those in Massachusetts and New Jersey. These areas are often known for harsh weather conditions, but are popular nonetheless.”
“Vacation home counties,” as the NAR report refers to them as, are places where vacant housing for seasonal, recreational, or occasional use comprise 20% or more of the county’s total housing stock. About 6.6%—or 206—of the 3,141 counties examined were identified as vacation home counties. Other notable vacation home counties that NAR identified in its report as rising in popularity were found in Colorado, Maine, New York, New Hampshire, Maryland, Delaware, North Carolina, and Vermont.
How Buyers Are Funding Their Purchase
Recent low mortgage rates are helping to make it more affordable for borrowers to purchase a second home. Cape May, N.J., topped the list of vacation home counties where second home mortgages comprised the largest share of home purchase loans, followed by Alpine and Mono counties in California and Hamilton and Delaware counties in New York, according to the NAR report.
Buyers who purchase a vacation home tend to pay all cash or obtain a mortgage usually with a 20% down payment. The majority of the borrowers who obtained mortgages for second homes earned around $100,000 or more, the report shows. The estimated mortgage payment to income ratio ranged from 4% to 12% in vacation home counties.
