"Despite extraordinarily tight credit conditions for purchasing a second home, the market share for vacation and investment homes held steady," NAR Chief Economist Lawrence Yun said. "A sizeable number of buyers made deals with all-cash offerings."
All-cash purchases have become prevalent in the second-home market in recent years, with 59% of investment buyers paying cash in 2010, as did 36% of vacation-home buyers.
With an overall decline in home sales during 2010, the volume of 543,000 vacation-home sales was down 1.8% from 553,000 in 2009. Investment purchases fell 7.8% to 867,000 in 2010 from 940,000 the previous year. Primary residence sales declined 5.6% to 3.81 million from 4.04 million in 2009.
Foreclosure or trustee sales accounted for 17% of investment purchases and 11% of vacation-home sales in 2010, compared with 5% of primary purchases.
"Second-home buyers purchased more distressed homes at discount than did buyers of primary residences," Yun said.
The median vacation-home price was $150,000 in 2010, down 11.2% from $169,000 in 2009, while the median investment-home price was $94,000, which is 10.5% below the $105,000 median in 2009.
By contrast, the median primary residence price declined a relatively modest 4.5% to $176,700 last year from $185,000 in 2009.
The typical vacation-home buyer in 2010 was 49 years old, had a median household income of $99,500, and purchased a property that was a median distance of 375 miles from his or her primary residence. NAR reported that 31% of vacation homes were within 100 miles and 41% were more than 500 miles.
Investment-home buyers had a median age of 45, earned $87,600, and bought a home that was fairly close to their primary residence, a median distance of 19 miles.
"The fall in home prices has opened opportunities for more families to enter the second-home market," Yun said. "The median income of investment buyers today is lower than it's been in recent years."
"While the median income of vacation-home buyers in 2010 is slightly above 2007 when it was $99,100, the median income of an investment-home buyer is 5.7% below $92,900 in 2007," he added.
"Even if purchases are delayed due to economic circumstances, the underlying long-term demand -- the desire for purchasing second homes -- remains because people in their 30s and 40s will reach the prime age for buying and will drive the second-home market in coming decades as conditions permit," Yun added.
Currently, 40.7 million people in the U.S. are ages 50-59, a group that dominated sales in the first part of the past decade and established records for second-home sales. An additional 43.8 million people are now in the primary buying demographic of 40-49 years old, while another 40.4 million are 30-39.
Lifestyle factors continue to be the primary motivation for vacation-home buyers, with the desire for rental income driving investment purchases. Vacation homes were more likely to be located in a rural area, while investment homes were more likely to be in a suburban location.
"Vacation-home buyers want the property for their own personal use, with 84% saying the primary reason for buying was to use for vacations or as a family retreat," Yun said. "Rental income generation was the primary motive for investment buyers. At the same time, nearly half indicated they sought to diversify their investments or saw a good investment opportunity."
NAR reported that 34% of vacation-home buyers said they plan to use the property as a primary residence in the future, as did 10% of investment buyers. Also, 21% of investment buyers and 14% of vacation buyers purchased the property for a family member, friend or relative to use.
"Some of these buyers purchase a home for their son or daughter to use while attending school," Yun explained.
Vacation-home buyers plan to keep their property for a median of 13 years while investment buyers plan to hold their property for a median of 10 years.
Geographically, 36% of vacation homes purchased in 2010 were in the South, 27% in the West, 19% in the Northeast, and 15% in the Midwest; and 3% were located outside of the U.S.
The distribution of investment properties differed from vacation homes: 32% were in the South, 24% in the West, 21% in the Northeast, and 20% in the Midwest; 3% were purchased outside the U.S.
NAR's analysis of U.S. Census Bureau data shows there are 7.9 million vacation homes and 41.6 million investment units in the U.S., compared with 74.8 million owner-occupied homes.
This story contains 730 words.
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