According to The National Association of Realtors®, sales of investment and vacation homes jumped in 2011, with the combined market share rising to the highest level since 2005.
Existing and new home sale transactions in 2011 show investment-home sales surged an extraordinary 64.5 percent to 1.23 million last year, from 749,000 in 2010. Vacation homes also rose 7 percent to 502,000 in 2011 from 469,000 in 2010. In Myrtle Beach, this trend does not appear to be short-lived as somewhat brisk sales continue during the first quarter of 2012.
Vacation home sales accounted for 11 percent of all transactions last year, which was up from 10 percent in 2010, while the portion of investment sales jumped to 27 percent in 2011 from 17 percent in 2010.
The National Association of Realtors Chief Economist, Lawrence Yun said real estate investors with cash are taking advantage of incredible market conditions the last few years. These conditions going into 2012 are still present with even the most recent economic news pointing towards mortgage interest rates remaining at or near record lows and ample inventory being available at bargain home prices. Yun even said, “Rising rental income easily beat cash sitting in banks as an added inducement. In addition 41 percent of investment buyers purchased more than one property.”
Nearly half of investment buyers said they were likely to purchase another property within two years.
Yun indicated the shift in investment buyer patterns in 2011 indicate the market, for the large part, is able to absorb foreclosures hitting the market. “Small-time investors are helping the market heal since REO (bank owned real estate) inventory is not lingering for an extended period. Any government program to sell REO inventory in bulk to large institutional companies should be limited to small geographic areas. Even where alternatives are needed, it’s best to rely on the expertise of local businesses, nonprofit organizations and government,” he said.
All cash purchases have become more common in the investment and vacation home market the last several years: 49 percent of investment buyers paid cash in 2011, as did 42 percent of vacation home buyers. Half of all investment home purchases in 2011 were distressed homes, as were 39 percent of vacation homes.
“Clearly we’re looking at investors with financial resources who see real estate as a good investment and who are not hesitant to use cash,” Yun said. For buyers who financed their purchase with a mortgage, typical down payments in the Myrtle Beach area were anywhere from a low of 10 percent and up to 35 percent for condotel type properties. The median down payment for both investment and vacation home buyers nationwide in 2011 was 27 percent.
The median investment home price in the nation was $100,000 in 2011, up 6.4 percent from $94,000 in 2010, while the median vacation home price was $121,300, down 19.1 perent from $150,000 in 2010.
Investment home buyers in 2011 had a median age of 50, earned $86,100 and purchased a property that was relatively close to their primary residence.
82% of vacation-home buyers said the primary reason for buying was to use the property themselves for vacations, or as a family retreat.
The typical vacation home buyer was 50 years old, had a median household income of $88,600 and purchased property that was a median distance of 305 miles from the primary residence. 35 percent of vacation homes were within 100 miles and 37 percent were more than 500 miles. Buyers said they planned to own their recreational property for at least 10 years on average.
Lifestyle factors have been the primary motivation for vacation home purchasers, while the desire for rental income drives investment purchases. Vacation homes purchased last year were more likely to be in suburban locations.
Eight-two percent of vacation-home buyers said the primary reason for buying was to use the property themselves for vacations, or as a family retreat. Thirty percent plan to use the property as a primary residence in the future, and only 22 percent plan to rent to others.
Half of investment buyers said they purchased primarily to generate rental income, and 34 percent wanted to diversify their investment portfolio or realized a good investment opportunity.
Sixteen percent of vacation buyers and 14 percent of investment buyers purchased the property for a family member, friend or relative to use. In many instances the home is intended for a son or daughter to use while attending school.
Fort-two percent of vacation homes purchased last year were in the South, 30 percent in the West, 15 percent in the Northeast and 12 percent in the Midwest; one percent were located outside of the United States.
Eight out of 10 second home buyers said it was a good time to buy. Nearly half of investment buyers said they were likely to purchase another property within two years, as did one-third of vacation home buyers.
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