Sales of investment and holiday homes in the United States jumped in 2011, with the combined market share rising to the highest level since 2005, according to the National Association of Realtors.
NAR’s 2012 Investment and Vacation Home Buyers Survey, covering existing and new home transactions in 2011, shows investment home sales were up 64.5% to 1.23 million last year from 749,000 in 2010.
Holiday home sales were up 7% to 502,000 in 2011 from 469,000 in 2010 and accounted for 11% of all transactions last year, up from 10% in 2010, while the portion of investment sales jumped to 27% in 2011 from 17% in 2010.
NAR chief economist Lawrence Yun said investors with cash took advantage of market conditions in 2011. ‘During the past year investors have been swooping into the market to take advantage of bargain home prices. Rising rental income easily beat cash sitting in banks as an added inducement. In addition, 41% of investment buyers purchased more than one property,’ he explained.
Yun said the shift in investment buyer patterns in 2011 shows the market, for the large part, is able to absorb foreclosures hitting the market. ‘Small time investors are helping the market heal since REO (bank real estate owned) inventory is not lingering for an extended period,’ he said.
All cash purchases have become fairly common in the investment vacation holiday home market during recent years. The research shows that 49% of investment buyers paid cash in 2011, as did 42% of holiday home buyers. Half of all investment home purchases in 2011 were distressed homes, as were 39% of holiday homes.
‘Clearly we’re looking at investors with financial resources who see real estate as a good investment and who aren’t hesitant to use cash,’ Yun said.
Of buyers who financed their purchase with a mortgage, large down payments were typical. The median down payment for both investment and holiday home buyers in 2011 was 27%.
The median investment home price was $100,000 in 2011, up 6.4% from $94,000 in 2010, while the median holiday home price was $121,300, down 19.1% from $150,000 in 2010.
Lifestyle factors have consistently been the primary motivation for holiday home buyers, while the desire for rental income drives investment purchases. Holiday homes purchased last year were more likely to be in suburban or rural areas while investment homes were concentrated in suburban locations.
Some 82% of holiday home buyers said the primary reason for buying was to use the property themselves for vacations, or as a family retreat while 30% said they plan to use the property as a primary residence in the future, and 22% plan to rent to others.
Half of investment buyers said they purchased primarily to generate rental income, and 34% wanted to diversify their investments or saw a good investment opportunity.
The research also showed that 16% of holiday home buyers and 14% of investment buyers purchased the property for a family member, friend or relative to use. In many cases the home is intended for a son or daughter to use while attending school.
Some 42% of holiday homes purchased last year were in the South, 30% in the West, 15% in the Northeast and 12% in the Midwest. Only 1% were outside of the US. Also 44% of investment properties were in the South, 23% in the West, 17% in the Midwest and 15% in the Northeast.
The research also found that eight out of 10 second home buyers said it was a good time to buy. Nearly half of investment buyers said they were likely to purchase another property within two years, as did one third of holiday home buyers.