Vacation-Home Markets Heat Up - WSJ.com
Click the link below for another article about the Vacation Home market. This one is from the Wall Street Journal.
Salt Lake City resident Donna
Peeters says that is one of the reasons she wants to step up her search for a
second home in Santa Barbara ,
Calif. She and her husband
started thinking about buying a vacation home a couple of years ago, she says,
and have seen prices fall as they waited. They are looking for a place close to
the beach, and expect to spend about $2 million cash.
Miami ,
for example, which already has seen prices of all homes drop 54% since 2007,
according to Moody's, is expected to lose about 0.1% annually over the next
five years. Meanwhile, Napa ,
Calif. , whose prices have also
been slashed in half, could see prices rise nearly 10% a year.
Napa , Calif.
Santa Barbara ,
Calif.
Southern California was one
of the hardest-hit markets and one of the earliest to fall. According to
Moody's, prices peaked in Santa Barbara back in the third quarter of 2005, six
months before the average peak nationwide. But since the stock market picked up
last year, sales of high-end vacation homes have been brisk, says Jon Perkins,
a Realtor at local agency
Village Properties.
Cape Cod ,
Mass.
Asheville ,
N.C.
Naples , Fla.
If you're thinking of buying a second home in the next five
years, this might be your best opportunity.
Kinlin Grover Real Estate
This compound on the Pamet Rive in Cape Cod , Mass. ,
has 3 bedrooms and 3.5 bathrooms.
After being battered during the housing bust, the
vacation-home market is showing signs of life. Reports of bidding wars are
trickling out of some of the locales that bore the brunt of the housing bust,
and brokers in other markets, while not sounding the "all clear," at
least say conditions aren't getting much worse.
More Real Estate Coverage
Near-record-low mortgage rates, bargain prices and dwindling
home inventories are bringing some once-untouchable markets within reach for
the first time in a decade, say housing-market experts.
Those factors are "creating a sense of urgency,"
says Pam O'Connor, president of Leading Real Estate Companies of the World, a
broker network. "People feel like they might miss this window."
"It definitely feels like a good time to jump in,"
she says.
Signs of a Bottom
Sales of vacation properties fell 56% between 2006 and 2010,
but climbed 7% in 2011 to 502,000, according to the most recent survey by the
National Association of Realtors, a trade association. Yet prices remain soft;
according to the NAR, the median price on vacation homes dropped more than 19%
in 2011 to $121,300.
Map: Ryan Heshka; Photos (t-b): Pacific Union International;
Kinlin Grover Real Estate; Village Properties; Town & Country Real Estate;
Hodnett Cooper Real Estate; Realty Executives; Pacific Union International
Realtors say some buyers—those who plan to keep a home in
the family for generations—are snapping up homes now, even though prices might
have further to drop, to take advantage of low mortgage rates. The average rate
on a 30-year fixed-rate loan stood at 3.97% for the week ending May 1,
according toKeith
Gumbinger, vice president at mortgage tracker HSH.com. Buyers with strong
credit who can put down more than 25% should be able to find rates near 4%, he
says.
The bottom for vacation-home prices will be clear only in
retrospect, but there are signs one might be forming, says Mark Zandi, chief
economist at Moody's Analytics. Some markets in California
already are seeing price increases, while hard-hit markets like Phoenix and Scottsdale ,
Ariz. , have seen slowing
declines, he says.
"From a long-term investment horizon, vacation homes
will do very well," Mr. Zandi says, citing low interest rates and expected
price appreciation in many markets.
The shorter-term outlook for vacation homes is murkier.
Moody's Analytics forecasts overall U.S. home prices will drop next year—by a
scant 0.8%—but the nationwide figures mask sharp geographical divides in
popular second-home markets.
Enlarge Image
Realtors say they are even seeing such dichotomies within
markets, with sales in more-desirable locations starting to perk up. In New
York's Hamptons, for example, homes positioned north of the Montauk Highway are
languishing on the market for months, while well-maintained homes south of the
highway, which are closer to the ocean, are sometimes getting multiple offers
within days, says Nicholas J. Planamento, president of the Hamptons and North
Fork Realtors Association.
Factors to Consider
There are a number of factors to consider when deciding
whether or not to buy a vacation home. The first: momentum.
If you considered an investment in the stock market, looking
at how prices moved over the past year would be a poor way to estimate future
performance. On the other hand, research by Yale University Professor Robert Shiller,
widely credited with predicting both the stock market crash of 2000 and the
housing bust, has shown that momentum in home prices has staying power.
Then again, prices have been dropping in many markets for
five years already, and most experts believe the steepest drops already have
taken place. And some stronger vacation-home markets, such as Burlington , Vt.
(up 1.3% in the past year), have momentum on their side.
A second point to consider: financing. Even though rates are
low, lenders' standards for making loans are tight. And real-estate agents say
deals are falling apart even after buyers obtain initial mortgage commitments.
That means buyers who can offer all cash have a leg up over
those who make offers contingent on financing. Buyers who don't want to tie up
that cash forever might consider purchasing the house with cash and then taking
out a mortgage later.
All-cash sales dominate in some of the most beaten-down
markets. One member of the broker network Leading Real Estate Companies of the
World in Sarasota, Fla.—where overall home prices have dropped 43% in the past
five years, to a median $174,900—reported that 70% of her home sales were
cash-only, says Ms. O'Connor.
Here are some vacation-home spots that look primed for a
breakout, according to five-year price forecasts by Moody's Analytics, along
with some that are still bouncing along the bottom.
Heating Up
Brunswick/St. Simons Island, Ga.
Drop from peak: 24%
Forecast: +6.4% per year
The marshy coast of southeastern Georgia features the Golden
Isles—which are replete with a luxurious resort and multimillion-dollar
mansions. The wealthy Southerners and foreign buyers who typically drive the
market disappeared by June 2007, says Mary Bryan Fields, who manages the sales
staff of Hodnett Cooper Real Estate in St. Simons Island, Ga.
But lately, those buyers have been coming back, she says.
"In 2005, people were telling us that they wished they
had bought here in '98 or 2000," she says. "We're basically back to
2000 prices right now. So now's their chance," she says.
Drop from peak: 52%
Forecast: +9.7% per year
In California
wine country, homes in the $1.2 million-and-up market are moving briskly, says
Elliott Faxstein, Napa-based director of the North Bay Association of Realtors.
Such buyers started to return in the fourth quarter of last year as the stock
market improved, he says. The area is also finding buyers in new millionaires
from Silicon Valley , a two-hour drive away,
says Mr. Faxstein.
One caveat: Difficulties with appraisals are making it hard
to get mortgages, meaning high-end buyers often have to step up with cash, he
says.
Drop from peak: 51%
Forecast: +7.4% per year
Mr. Perkins says a quarter of the inventory of
$10-million-plus homes that were on the market in December has been sold or put
into escrow in the first quarter of 2012. Though most vacation-home segments
have picked up, he says deals still can be found in homes that haven't been
remodeled or ones that started remodels that were stalled by the housing bust.
Slowly Strengthening
Drop from peak: 22%
Forecast: +3.6% per year
Though the Cape continued
to see prices fall last year, the swankiest towns—such as Chatham and
Wellfleet—are making a comeback. Homes in Chatham
(median price: $639,000) sold for 8.3% more in 2011 than they did in 2010,
while homes in Wellfleet ($540,250 median) sold for nearly 14% more, according
to Boston-based Warren Group, a real estate data tracker.
Realtor Dan Sheehy of Kinlin Grover Real Estate in Wellfleet
says some buyers have come to town expecting a soft market.
"It's an education process of showing that the market
is picking up," he says, noting that the pace of sales also isn't as rapid
as it was during the boom.
Drop from peak: 11%
Forecast: +2.0% per year
Set in the Blue Ridge Mountains of North
Carolina , Asheville 's real-estate
market hasn't had nearly as tumultuous a time as other markets in the South,
such as Florida .
Still, certain pockets of western North Carolina
did see overbuilding by eager developers, says Realtor Brian Etheridge of
Carolina Mountain Sales in Asheville .
Mountain homes in older communities that were built before
the 2000s have seen relatively modest price decreases, but homes and land being
sold in neighborhoods started in the early and mid-2000s have seen prices go
down by as much as 50%, he says. The reason: Buyers legitimately fear that
long-promised amenities, like golf courses and club houses, will take years to
come to fruition, Mr. Etheridge says.
Provo/Sundance, Utah
Drop from peak: 24%
Forecast: +2.5% per year
Just a 20-minute drive from Provo sits the posh ski resort of Sundance,
also a home to the eponymous film festival. The market—relatively small with
only a few hundred condominiums and homes—suffered greatly beginning in 2008,
says Roy Laycock, a real-estate agent at Coldwell Banker in Sundance, with
prices on some units dropping by more than 50%.
In general, larger condominiums have held up better than
single-family homes, he says, but both segments have been hit by foreclosures
and short sales.
Forecast Is Flat
The Hamptons and North Fork , N.Y.
Drop from peak: 29%
Forecast: +0.83% per year (Suffolk County )
Though prices aren't dropping as rapidly as they had been,
the Hamptons could fall victim to a second wave of foreclosures once lenders,
stalled by shoddy paperwork, get their act together, says George Simpson, owner
of Suffolk Research Service, a market-research company.
"We keep thinking that it will pick up, but we've been
sitting in the same place for four years," says Mr. Simpson.
Mr. Planamento, the local Realtor association president,
says the best deals can be had among properties that need renovation work,
which many upscale buyers shy away from. And as has always been the case, homes
south of the Montauk Highway, which are closer to the Atlantic, have held value
better, he says.
Drop from peak: 55%
Forecast: +1.3% per year
Though sub-$500,000 homes have seen prices flatten or
slightly rise over the last 12 months, $1-million-plus homes are still seeing
price declines, according to the Naples Area Board of Realtors. Homes that sold
for between $1 million and $2 million fell in price by about 6% between the
first quarters of 2011 and 2012, while homes priced above $2 million lost 10%.
Realtor Brenda Fioretti of Prudential Florida Realty says
that about 70% of home sales in Naples are cash-only
deals and that buyers are flocking to high-rise condominium buildings on the Gulf of Mexico .
Phoenix/Scottsdale, Ariz.
Drop from peak: 56%
Forecast: +1.7% per year
This desert enclave was one of the first to be hit by the
real-estate downturn, but has also been one of the first to recover, says
Gordon Snyder, president of the local Realtor association.
The problem for vacation-home owners: The rebound has
occurred mostly in lower-priced homes, while there's a big inventory of
higher-priced homes, Mr. Snyder says.
This comment has been removed by a blog administrator.
ReplyDelete