Americans keep snapping up second homes

Vacation, investment properties make up 40 percent of 2005 sales
WASHINGTON - Americans bought a record number of second homes for vacation and investment last year, some 40 percent of 2005 total sales, a trade group said Wednesday.

And with baby boomers at the peak of their earning potential, the push to snap up vacation homes is unlikely to reverse soon despite a broader housing slowdown, the National Association of Realtors said.

The group said vacation home sales rose 16.9 percent in 2005 to a record 1.02 million units from 872,000 in 2004. Purchases of homes for investment, chiefly rental income, rose 15.7 percent to a record 2.32 million units last year from 2 million in 2004.

NAR said Americans snapped up 3.34 million second homes in 2005 -- 27.7 percent for investment and 12.2 percent for vacation. That was up 16.0 percent from 2.88 million in 2004.

Second home purchases also made up a larger chunk of the total, rising to 39.9 percent of total residential real estate transactions from 36 percent the prior year.

"The baby boom generation is driving second home sales," NAR chief economist David Lereah said in a statement.

"They're at the optimum point in life when people become interested in second homes, they're at the peak of their earnings, interest rates remain historically low and boomers want to diversify investments," he added.

The buyer profiles for the two types of homes were similar, the group said.

According to the report, the average investment-home buyer in 2005 was 49 and earned $81,400 a year. For those seeking vacation retreats or housing for children in college, the typical age was 52 and income at $82,800.

Americans paid more for their second properties as well, driving the median price of a vacation home to $204,100 in 2005 from $190,000 in 2004, while the cost of a typical investment property climbed to $183,500 from $148,000 the prior year.

"Vacation-home sales will remain strong for the foreseeable future given the fact that baby boomers are favorably positioned in terms of affordability, as well as being at the stage in life when people are most interested in making that kind of a lifestyle purchase," Lereah said.

"On the other hand, investment home sales are likely to decline this year, in part because of higher interest rates," he added. Still, he said the long-term outlook for second homes sales was positive "because more people will be moving into the prime years for buying a second home."

NAR said 33 percent of 2005 vacation home purchases occurred in the Midwest, followed by 30 percent in the South, 20 percent in the West, and 17 percent in the Northeast.

In the category of investment homes, 38 percent were bought in the South, 24 percent in each of the Midwest and West, and 15 percent in the Northeast.

The NAR report was based on more than 11,000 responses to surveys to collect data on market share, buying activity, demographics and buyer preferences.

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