Vacation home sales surge
Discretionary is mostly defined as optional or flexible, as in I have the option to purchase a Mercedes Benz or I have the option to purchase a Kia. Truth is you may not actually have the option if your discretionary funds only allow for a Kia. Fortunately for Florida, a recent survey conducted by the National Associations of Realtors confirms what a lot of us on Anna Maria already knew, a lot of people have a lot more Mercedes Benz money than we’ve seen in recent years.
The National Association of Realtors’ (NAR) annual Investment and Vacation Home Buyers Survey was published on April 2.The survey, which covered 2,008 households, covers existing and new home transactions in 2013 and concluded that vacation home sales jumped 29.7 percent to an estimated 717,000 last year from 553,000 in 2012. Although this rapid jump proves that the value of residential real estate has certainly changed in just a few years, the 2013 numbers were still well short of the high point of nearly 1.1 million vacation homes purchased in 2006, the high water mark of the real estate market.
According to Lawrence Yun, chief economist for the NAR, this growth is a direct result of the improvement in equity markets. The stock market gains last year and rising home values are creating confidence in buyers who are feeling more wealthy and more willing to take a chance on something totally discretionary, like a vacation home.
Vacation home sales accounted for 13 percent of all transactions last year up from 11 percent in 2012, which is the highest market share since 2006. The median vacation home price was $168,000 in 2013, up 12.5 percent from $150,000 in 2012. In addition, all cash purchases remain common for vacation home purchases at 38 percent in 2013, and vacations buyers who did seek financing typically put 30 percent down.
Also part of the NAR’s survey was the report that investment purchases fell below the elevated levels seen in the previous two years. The market share of investment properties fell to 20 percent in 2013 from 24 percent in 2012. Again, many investment purchases were all cash with the NAR reporting that 46 percent of investment buyers paid cash. Economists indicated that investment buyers slowed their purchasing in 2013 because of an increase in pricing and a decline in distressed properties, something that was predictable.
So where are all these vacation homes being sold and why? The South accounted for most vacation home sales at 41 percent, next was the West with 28 percent. The Northeast came in at 18 percent and the Midwest at 14 percent. Not that anyone needs to tell us but Florida is at the forefront of the South’s vacation home market.
Mild weather, of course, is one of the driving factors in where buyers purchase vacation homes, and according to the NRA survey, 87 percent want to use the property for family vacations. Thirty-one percent of vacation home buyers plan on using the property as a primary residence in the future, 28 percent want to diversity their investments, 23 percent plan to rent the property and 22 percent intend it for use by a family member, friend or relative.
I pick “discretionary” as the word for this past winter season. Based on the number of home sales and the increase in listing and selling prices on Anna Maria buyers are awash in discretionary funds and are definitely feeling the “wealth effect” of a real estate market that is nothing short of slamming.