Owner-occupied purchases jumped 17.4% to 3.27 million last year from 2.79 million in 2011.
Vacation-home sales accounted for 11% of all transactions last year, unchanged from 2011, while the portion of investment sales was 24% in 2012, down from 27% in 2011, marking the second highest share since 2005.
NAR Chief Economist Lawrence Yun said favorable conditions are driving second-home sales.
"We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes," he said. "Attractively priced recreational property is also a big draw."
Yun noted an ongoing investor presence.
"Investors have been very active in the market over the past two years, attracted mostly by discounted foreclosures that could be quickly turned into profitable rentals," he said. "With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years."
The median investment-home price was $115,000 in 2012, up 15.0% from $100,000 in 2011, while the median vacation-home price was $150,000, compared with $121,300 in 2011, reflecting a greater number of more expensive recreational property sales in 2012.
Sales involving all-cash transactions remained common in the investment- and vacation-home market: Half of investment buyers paid cash in 2012, as did 46% of vacation-home buyers. Forty-seven percent of investment homes purchased in 2012 were distressed homes, as were 35% of vacation homes.
Of buyers who financed their purchase with a mortgage in 2012, large down-payments remained typical. The median down payment for both investment- and vacation-home buyers was 27%, the same as in 2011.
Investment-home buyers in 2012 had a median age of 45, earned $85,700 and bought a home that was relatively close to their primary residence, a median distance of 21 miles, although 29% were more than 100 miles away. Thirty-five percent of investment buyers purchased more than one property.
"Property flipping modestly increased in in 2012," Yun said. "However, this isn't flipping in the sense of what took place during the housing boom. Rather, investors generally are renovating and improving properties before placing them back on the market to resell at a profit."
Six percent of homes purchased by investment buyers last year have already been resold, and another 8% are planned to be sold within a year. In the 2011 study, 5% of investment homes were already resold, and 8% were planned to be sold within a year.
Overall, investment buyers plan to hold the property for a median of eight years, up from five years in 2011.
Seventy-eight percent of all second-home buyers said it was a good time to buy, compared with 68% of primary residence buyers.
"This suggests that second-home buyers tend to be a step ahead of general buyers in sensing a market recovery," Yun said.
The typical vacation-home buyer was 47 years old, had a median household income of $92,100 and purchased a property that was a median distance of 435 miles from their primary residence; 34% of vacation homes were within 100 miles, and 46% were more than 500 miles. Buyers plan to own their recreational property for about 10 years.
Lifestyle factors remain the primary motivation for vacation-home buyers, while rental income is the main factor in investment purchases.
Buyers listed many reasons for purchasing a vacation home: 80% want to use the property for vacations or as a family retreat, 27% plan to use it as a primary residence in the future, 23% plan to rent to others, and 23% wanted to diversify their investments or saw a good investment opportunity.
Fifty-five percent of investment buyers said they purchased for rental income, 30% wanted to diversify their investments or saw a good investment opportunity, and 20% wanted to use the home for vacations or as a family retreat.
Eleven percent of vacation buyers and 16% of investment buyers purchased the property for a family member, friend or relative to use, often for a son or daughter to use while attending school.
Forty-five percent of vacation homes purchased last year were in the South, 25% in the West, 17% in the Northeast, and 12% in the Midwest.
Forty-seven percent of investment buyers said they were likely to purchase another investment property within two years, as did 37% of vacation-home buyers. Twenty-nine percent of vacation buyers said they were likely to purchase another vacation home within two years, as did 31% of investment buyers.
Approximately 42.8 million people in the U.S. are ages 50-59, an age group that dominated second-home sales in the middle part of the past decade and established records. An additional 43.1 million people are 40-49 years old, which is the prime age for current buyers, while another 40.1 million are 30-39.
NAR's analysis of U.S. Census Bureau data shows there are 7.9 million vacation homes and 43.7 million investment units in the U.S., compared with 75.2 million owner-occupied homes.
NAR's 2013 Investment and Vacation Home Buyers Survey was conducted last March. It can be ordered by calling 800-874-6500, or online at www.realtor.org/prodser.nsf/Research. The report is free to NAR members and costs $149.95 for non-members.
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