Time to buy a vacation home?
It may seem counterintuitive, considering everything that's gone on in the real estate market in recent years, but this may be the absolute best time to buy a vacation home. I don't mean just because prices are down, but also because second home buyers' outlook is up.
We've been reporting for some time that Anna Maria real estate sales are exploding, but it wasn't until I read a Wall Street Journal analysis that I realized that we're not alone. In fact, much of the luxury and second home market around the country is on a major upswing.
According to the Journal, buyers have "frugality fatigue," they're tired of waiting for the right time, the bottom of the market or for their tax advisor to give them the green light. They're moving forward with cash in their pockets and creative lifestyles in their heads.
As we all know, location is the key to real estate, and around the country, it doesn't matter if you live on a beach or a ski slope, your property is being eyed through second home buyer eyes. Although the second home market experienced significant drops in value according to the National Association of Realtors, 25 percent from 2006, it was pretty much in line with the 22 percent drop for overall housing in the nation. I found these to be interesting numbers proving the second home market never really collapsed in spite of a national recession.
In May, the National Association of Realtors also reported that most second home or vacation buyers aren't necessarily looking for vast amounts of appreciation. Most of them, more than 80 percent, are purchasing vacation homes to live in and enjoy, which could explain why this discretionary market held. And not surprising, cash is king with 36 percent of vacation homes purchased in 2010 being cash transactions.
In addition, even for the most altruistic vacation home buyer, there are tax advantages to buying a vacation home. For the moment at least, if you do have a mortgage on a second home, the interest is deductible. However, as of this writing, the second home mortgage interest deduction is in the crosshairs Congress as one of the many tax deductions proposed be eliminated in order to increase revenue. You can also setup your second home as a rental and still use it 15 days a year, which would allow other tax deductions for things like maintenance and rental fees.
Santa Barbara, Calif., Aspen, Colo., The Hamptons, N. Y., Hilton Head, S. C. and Palm Beach, Fla., are some of the traditional second home markets that are seeing substantial activity. Buyers are snapping up homes in these areas and others where the median home price five years ago was over a million and now is selling for 30 percent to 40 percent less.
If your intuition is screaming, "Buy that home on the beach buy that home on the beach," maybe it's time to pay attention before the time to buy becomes nothing more than a missed opportunity. And if I know my baby boomers, missed opportunities are something they never experienced.