Many people looking for a wise real estate investment usually purchase second homes in another place where they can vacation from time to time with their loved ones. The baby boomers comprise this segment of real estate buyers which in turn drives the growth of the vacation real estate market. But although a real estate group has reported a plunge in 2006, the demand for vacation homes remains strong this 2007.
The National Association of Realtors (NAR) revealed that the sales of second homes for investment went down by 28.9 percent in 2006. The figure was down from 2.32 million vacation homes sold in 2005 during the peak of the so-called ?five-year housing boom? to 1.65 million. NAR, however, made it clear that the drop was not due to the general housing slump last year because vacation homes soared by 4.7 percent to a record 1.07 million units compared to 1.02 million sales in 2005.
NAR further said that based on its survey, 22 percent of all homes bought in 2006 were meant for investment and the figure was down from a 28 percent market share in 2005. The number of vacation homes purchased, though, went up from 12 percent in 2005 to 14 percent of the total market for new and existing homes.
Vacation home buyers
The typical buyers of vacation homes in 2006 were those aged 44 and had a median household income of $102,000. The vacation homes preferred were at a mid-point of 215 miles from the homeowners? primary residence. NAR said the demographics were favorable for sales of vacation homes with most consumers in their prime buying ages. Buyers purchased second homes as recreational properties for personal use with investment as a secondary reason. Real estate experts say it does not necessarily follow that those who buy multiple vacation properties are the wealthy people. This small but growing segment of the market are usually those nearing their retirement, making a good living and have more control over their work schedule that they have extra time to spend at their vacation homes. Apart from recreation, some of them earn short-term income by renting out their second or third homes.
As for the price, the median rate of a vacation home in 2006 was down two percent from $204,100 in 2005 to $200,000 in 2006. The typical investment home also sold lower at $150,000 compared to the $183,500 in 2005.
NAR studies
The second home segment of the housing market is actually bigger than expected making up one-third of the market, according to the NAR. Two NAR studies have confirmed that indeed this market is growing based on the number of purchases made in 2003 and 2004. In 2004 alone, 36 percent or a total of 2.82 million of homes bought were second homes while in 2003, the total was only 2.42 million. Investment was the main purpose of the purchases (23 percent) while only 13 percent were for vacation reasons.
NAR's studies on second homes were based on two surveys done between middle of 2003 and middle of 2004. Census Bureau statistics in 2003 showed there were 43.8 million second homes in the U.S., 6.6 million vacation homes and 37.2 million investment properties.
However, if you are thinking it is too late for a bargain in a prime retirement area, you could be wrong! Some areas are still booming, and even though we have been reading of a downturn in realty, some areas are holding steady. The question is why?
Everyone wants to invest in solid realty, but what is the secret? How to choose a viable asset? Is there a secret to being a successful in real estate investing? It is always a gamble, investing money will always have some risk, but you can investigate the odds!
For instance, when buying real estate try to project what the future market will be and buy the type of home that will be in demand for a few years to come. This is where you have to take into account not only the economic climate but also the demographics of our society.
For most realty investors, the demographics are obvious in at least one area. The largest population of retirees will be approaching retirement age in a few short years. For people investing in real estate, or wanting to buy a home that keeps its value, this could be an indicator of what to buy. At least one type of home that will be in demand will obviously be the 'retirement choice' type of home and in a retirement choice environment..
Condos are very popular. This means that a condo may be a good investment for now, as many of the 'baby boomers' will be thinking of buying one in about five years time, when they reach 65 - and retire. (Baby boomers were all born in the first year or two after World War II). They account for a very large part of the population. One theory is that they will be the last generation to have a generous pension, and can therefore afford to splash out on a retirement home. Beach front towns and resorts are already experiencing an increase in sales.
Since retirement equals house move there should be a large inventory of homes for sale in 2011; this is when the baby boomers reach 65. Many people pursue their life dream upon retirement, and perhaps go and live in a warm sunny climate, by the beach, or in the mountains. Either way, it involves buying and selling a home.
Prime retirement areas (including areas in USA) are experiencing above average sales. Buying a retirement home before retirement is the ideal situation. You can always rent it out, or just take your vacation there; it is easier to finance it before the salary must be given up and the pension kicks in. If you are a baby boomer it is good sense to get in now before the real rush happens in 2011.
You can still buy a home and expect it to be a sound investment in many of these choice retirement and vacation areas.
Both Richard S & Nick Viale are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Richard S has sinced written about articles on various topics from Real Estate, Sell Home and Real Estate. Richard Soto is the author of this article. Check for more on. Richard S's top article generates over 5400 views. to your Favourites.
Nick Viale has sinced written about articles on various topics from Family Travel, Real Estate and Real Estate. Written on behalf of Nicholas Viale. Nicholas has over twenty years experience as a professional real estate agent. He has lived and worked in the