Posted on 02 May 2012
Sales of vacation homes are picking up as low prices pull buyers off the fence. But with travel costs rising and consumers still uncertain about the economy, many buyers are snapping up properties closer to home.
That is a change from the past decade when people often headed out of state to buy vacation homes near resorts and areas that were tourist destinations, including Orlando near Florida's Walt Disney World and the gambling Mecca of Las Vegas.
But these days, many vacation-home buyers are turning back the clock and looking for properties in the more traditional—and less glitzy—vacation-home communities near where they live.
Jed Kolko, chief economist at Trulia Inc., a real-estate information website, said that increasingly "people choose second homes that are a shorter drive rather than a plane flight away."
A survey by the National Association of Realtors found that the median distance between a buyer's primary residence and his vacation home declined 19% to 305 miles in 2011 from 2010. It was the first decline since the group began keeping data in 2006.
To be sure, vacation-home sales also are picking up in parts of Florida, Nevada and other states that have long catered to vacationers, although real estate agents say more of those buyers tend to be from nearby states and fewer are from far away. And plenty of retirees still want to vacation in climates that are warm year-round.
The shift in buying habits partly reflects the changing portrait of the typical vacation-home buyer. In the recent past, the vacation-home market was led by families looking for places with attractions for children as well as adults. But a growing number of buyers are older and seeking vacation homes that transition into retirement homes.
"People want to stay within driving distance because they're more able to maintain the homes, they have better networks in place and friends and family nearby to use and sustain the homes," said Jon Gray, vice president of HomeAway.com, a website that lists vacation rentals. A survey in March by site operator HomeAway Inc. found that the most popular markets among vacationers this year are those that can be reached in a drive of four hours or less from home. That makes those markets good investment opportunities for the 91% of vacation-home buyers who plan to rent their properties when they aren't using them.
Today's vacation-home buyers also are less affluent than in past years and more cost-sensitive. According to the NAR study, the average annual income of vacation-home buyers declined to $88,600 in 2011 from $99,500 in 2010. "If you have more typical vacation buyers coming into the marketplace, they're looking at the whole package, including the expense of getting there, as well," says Stan Humphries, chief economist with real-estate information company Zillow Inc.
Meanwhile, the values of vacation homes continue to fall, with the median sales price declining 19%, to $121,300 between 2010 and 2011, according to NAR. The trend is benefiting vacation communities near cities, including beach towns in the Northeast, from Massachusetts to the Carolinas, as well as lakefront enclaves in the Midwest and desert locales in California such as the Coachella Valley, according to real-estate agents.
Vickie Leese, a 53-year-old financial adviser in Westminster, Md., closed in April on a two-bedroom home in an Ocean City, Md., condominium complex that has a swimming pool and is three blocks from the beach. Over the past year and a half, Ms. Leese visited and considered buying homes in a number of places, including Fort Myers, Fla., and Myrtle Beach, S.C. But in the end, she decided to stay in Maryland.
"Florida would require a flight or a 24-hour drive for me, and the Carolinas are eight hours away," Ms. Leese said. "Even though the real estate in Ocean City is more expensive, in a way it's more affordable. Even with gas prices skyrocketing, it made more economic sense to buy there."
The rising cost of gas and airfares is a huge factor for many buyers. The average cost of a gallon of gasoline was $3.83 this week. While down from the two-year peak of $3.97 reached in May 2011, gas prices have been rising steadily since mid-December, when they fell to a 10-month low of $3.23 a gallon. Airfares, meanwhile, jumped 14% between March 2010 and March 2011, according to the U.S. Department of Labor.
Susan Ivey, a customer-service and accounts director for a health-insurance company in St. Louis, recently signed a contract to buy a three-bedroom house with a boat dock and a swimming platform on the shore of Lake of the Ozarks, a Missouri vacation spot.
She said the two main considerations in her decision to buy were price and proximity. She is paying $236,000 for the home, which was advertised as a "short sale"—or a home selling for less than the amount of the mortgage debt on the property. In 2007, the house was listed at about $350,000. Ms. Ivey can drive there on weekends in roughly three and a half hours.
Florida remains popular with vacation-home buyers around the world, but these days an increasing number of American buyers are from neighboring states. Among them is Morris Bart, a lawyer in New Orleans, who also owns a vacation home in Aspen, Colo. He recently closed on a $1.3 million waterfront penthouse condo—which had an asking price of nearly $3 million several years ago—near the beach in Destin, Fla. Mr. Bart said he plans to make the four-hour drive from New Orleans to Destin once a month.
"The minute I get in my car in New Orleans and head out there, that's when I feel like my vacation has begun," Mr. Bart said.