A second home used to be reserved for getaways within an easy drive of the family home and rarely rented out - let alone to complete strangers.
A new survey from the National Association of Realtors not only shows second homes are being purchased further from home, but prices also are on the rise with more buyers planning on renting them out when they are not using them.
NAR's 2013 Investment and Vacation Home Buyers Survey revealed that 76 percent of buyers indicated rental income influenced their decision to buy last year, a five percentage-point increase from 2011. In addition, of those who do plan to rent out their vacation homes, 92 percent plan to do so within the next 12 months to either long-term or short-term renters or a combination of the two.
One of the surprises of the survey was the distance between a buyer's primary residence and second home. For years, the rule of thumb was any property within a two-hour drive of a primary residence made sense. That way, an owner could get to the property in an emergency or quickly transfer keys, plus clean and maintain the unit.
In 2012, the median distance grew to 435 miles from the primary residence. Approximately 34 percent of vacation homes were within 100 miles of the primary residence and 46 percent were more than 500 miles.
Jon Gray, senior vice president for HomeAway, an online vacation rental site with 711,000 paid listings in 171 countries, attributes the increased distance parameters to the power of the Internet.
"I think sites like HomeAway and VRBO have provided owners with the tools they need to manage properties from a distance," Gray said. "There are also services and partners now specializing in the second-home market that were not even around five years ago. There are efficient, safe methods to collect rents, offer second-home insurance . . . virtually everything an owner would need."
Vacation-home sales accounted for 11 percent of all transactions last year, the survey found. (NAR's analysis of U.S. Census Bureau data shows there are 7.9 million vacation homes compared with 75.2 million owner-occupied homes.) 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.
"Although vacation home prices are starting to rise, the cost is still incredibly affordable compared with prices 10 years ago," says Brian Sharples, HomeAway's CEO. "At the same time, the interest in vacation rentals by travelers in the United States remains strong, and the speed and ease with which owners can list and rent a home online has never been more favorable, making it the perfect time to consider the purchase of a vacation home."
All-cash purchases remained common in the vacation-home market. Approximately 46 percent of vacation-homebuyers paid cash. Despite the uptick in price, 35 percent of vacation homes were classified as distressed (foreclosures and short sales).
"We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes," said Lawrence Yun, NAR's chief economist. "Attractively priced recreational property is also a big draw."
Approximately 42.8 million people in the U.S. are ages 50-59 - a 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.
According to the new survey, the typical vacation-homebuyer was 47 years old and had a median household income of $92,100. Those who plan to actively rent out their vacation homes have turned to sites like HomeAway, which charges $349 per property for an annual subscription.
"Vacation homeowners who advertise their properties with HomeAway make an average of about $26,000 in annual rental income, and about half of them are able to cover more than 75 percent of their home's mortgage from rental income," Gray said. "We've also seen a number of younger second-home buyers enter the market. Many of them are buying now with the idea of renting it out until they can use it more or retire."
The NAR survey, conducted in March 2013, includes answers from 2,326 usable responses about homes purchased during 2012.
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