The survey report from the National Association of Realtors also shows that investment purchases increased for the first time in five years. And mirroring the strong price growth seen throughout the US, the median sales price of both holiday and investment homes surged in 2015.
They Investment and Vacation Home Buyers Survey, covering existing and new home transactions in 2015, found that holiday home sales last year declined to an estimated 920,000, down 18.5% from their most recent peak level of 1.13 million in 2014.
Investment home sales in 2015 jumped 7% to an estimated 1.09 million from 1.02 million in 2014. Owner occupied purchases jumped 15.9% to 3.74 million last year from 3.23 million in 2014, the highest level since 2007.
According to Lawrence Yun, NAR chief economist, while holiday homes sales took a sizeable step back in 2015 they still came in at the second highest amount since 2006.
‘Baby boomers at or near retirement continue to propel the demand for second homes, although headwinds softened the overall volume of vacation sales last year,’ he said.
‘The expanding pool of buyers amidst a dwindling number of bargain priced properties led to tighter supply and fewer sales and caused the price of vacation homes to rise. Furthermore, the turbulence that hit the financial markets the second half of the year likely seized some would-be buyers' available cash,’ he added.
The median sales price of both vacation and investment homes soared in 2015. For holiday homes at $192,000 it was up 28% from $150,000 in 2014. The median investment home sales price was $143,500, up 15.3% from $124,500 a year ago.
According to Yun, many of the metro areas with the strongest price appreciation in 2015 were in the South, the most popular destination for vacation buyers, and particularly in several Florida markets. While increased buyer demand contributed to the run-up in prices, it also likely squeezed less affluent households looking to purchase vacation properties.
Holiday home sales accounted for 16% of all transactions in 2015, down from 21% in 2014 but still the second highest share since the survey was first conducted in 2003. The portion of investment sales remained unchanged from a year ago at 19% and owner occupied purchases increased to 65% from 60% in 2014.
‘Despite a smaller share of distressed properties coming onto the market, investment purchases reversed course in 2015 after declining for four straight years. Steadily increasing home prices and strong rental demand appear to be giving more individual investors assurance that purchasing real estate will diversify their portfolios and generate additional income if they decide to rent out the home,’ Yun said.
The survey found that in addition to longer term rentals, investors are most likely to attempt to and rent their properties for less than 30 days. Among investors, 42% did or tried to rent their property in 2015 and plan to rent their property in 2016. Some 24% of vacation buyers did or tried to rent their property in 2015 and plan to rent their property this year. Vacation buyers are more likely to use a property manager or social media to rent their property, while investors are more likely to use a traditional real estate agency.
The share of vacation buyers who paid in cash jumped to 38% from 30% in 2014, while cash purchases by investors decreased to 39% from 41% a year ago. Of buyers who financed their purchase with a mortgage some 52% of vacation buyers and 44% of investors financed less than 70% of the purchase price.
The overall trend of fewer distressed properties, short sale or foreclosure, on the market resulted in vacation buyers and investors purchasing less of them in 2015. Some 36% of vacation buyers and 39% of investors purchased a distressed property a year ago compared with 45% and 44% respectively in 2014.
Nearly half of all vacation homes bought last year were in the South at 47% compared to 41% in 2014, some 25% were in the West, unchanged from a year ago, 15% in the Northeast, also unchanged from a year ago, and 13% in the Midwest, down 1% compared to 2014.
Some 37% of vacation buyers plan to use their property for vacations or as a family retreat, 16% bought for future retirement plans and only 7% purchased to generate income through renting the property, a decrease from 11% in 2014.
The typical investment home buyer in 2015 had a median household income of $95,800 and 62% bought a detached single family home that was a median distance of 22 miles from their primary residence.
Investment buyers last year purchased property for a variety of reasons, with an increasing share from 2014 citing rental income as the primary reason at 42% compared to 37% in 2014, followed by low prices and the buyer found a good deal at 16% and 14% buying for potential price appreciation.
