Vacation Home Sales on the Surge

According to a recent survey conducted in March of 2014 by The National Association of Realtors®, “vacation home sales have risen strongly, while investment purchases have declined below the elevated levels seen from the previous two years.” Our own analysis of the Grand Strand residential market shows a surge in residential sales as shown here.

 

“More than eight out of 10 second-home buyers, both for vacation and investment homes, said it was a good time to buy.”

The National Association of Realtor’s 2014 Investment and Vacation Home Buyers Survey, covering existing-and new-home transactions in 2013, shows vacation-home sales jumped 29.7 percent to an estimated 717,000 last year from 553,000 in 2012. Investment-home sales fell 8.5 percent to an estimated 1.10 million in 2013 from 1.21 million in 2012. Owner-occupied purchases rose 13.1 percent to 3.70 million last year from 3.27 million in 2012. The sales estimates are based on responses from households and exclude institutional investment activity.

 

The National Association of Realtors Chief Economist, Lawrence Yun expected an improvement in the vacation home market. Yun said “Growth in the equity markets has greatly benefited high net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,” he said. “However, vacation-home sales are still about one-third below the peak activity seen in 2006.”

Vacation-home sales accounted for 13 percent of all transactions last year, their highest market share since 2006, while the portion of investment sales fell to 20 percent in 2013 from 24 percent in 2012.

Yun said the pullback in investment activity is understandable. “Investment buyers slowed their purchasing in 2013 because prices were rising quickly along with a declining availability of discounted foreclosures over the course of the year,” he said.

“In 2011 and 2012, investment property was a no-brainer because home prices had sharply over corrected during the downturn in many areas, creating great bargains that could be quickly turned into profitable rentals. With a return to more normal market conditions, investors now have to evaluate their purchases more carefully and do their homework,” Yun added.

The median investment-home price was $130,000 in 2013, up 13.0 percent from $115,000 in 2012, while the median vacation-home price was $168,700, up 12.5 percent from $150,000 in 2012.

All-cash purchases remained fairly common in the investment- and vacation-home market:  46 percent of investment buyers paid cash in 2013, as did 38 percent of vacation-home buyers.

Of buyers who financed their purchase with a mortgage, large down payments continued to be the norm in 2013. The median down payment for investment buyers was 26 percent, while vacation-home buyers typically put 30 percent down.

 

“87 percent want to use the property for vacations or as a family retreat, 31 percent plan to use it as a primary residence in the future, 28 percent wanted to diversify their investments or saw a good investment opportunity, 23 percent plan to rent to others and 22 percent intend it for use by a family member, friend or relative.”

Forty-seven percent of investment homes purchased in 2013 were distressed homes, as were 42 percent of vacation homes.

 

Lifestyle factors remain the primary motivation for vacation-home buyers, while rental income is the main factor in investment purchases.

The typical vacation-home buyer was 43 years old, had a median household income of $85,600 and purchased a property that was a median distance of 180 miles from his or her primary residence; 46 percent of vacation homes were within 100 miles and 34 percent were more than 500 miles. Buyers plan to own their recreational property for a median of 6 years, down from 10 years in 2012.

Five percent of vacation-home buyers had already resold their property, while another 9 percent plan to sell within a year. “This reflects the 28 percent of recreational property buyers who said they purchased to diversify investments or saw a good investment opportunity,” Yun said.

Buyers listed many reasons for purchasing a vacation home:  87 percent want to use the property for vacations or as a family retreat31 percent plan to use it as a primary residence in the future28 percent wanted to diversify their investments or saw a good investment opportunity23 percent plan to rent to others and 22 percent intend it for use by a family member, friend or relative.

Forty-one percent of vacation homes purchased last year were in the South, 28 percent in the West, 18 percent in the Northeast and 14 percent in the Midwest.

Investment-home buyers in 2013 had a median age of 42, earned $111,400 and bought a home that was relatively close to their primary residence – a median distance of 20 miles.

Fifty percent of investment buyers said they purchased for rental income, 34 percent wanted to diversify their investments or saw a good investment opportunity, and 22 percent bought for a family member, friend or relative to use – often to house a son or daughter while attending college.

Seven percent of homes purchased by investment buyers last year have already been resold, and another 10 percent are planned to be sold within a year. Overall, investment buyers plan to hold the property for a median of 5 years, down from 8 years in 2012. Continue reading

Are You Getting a Good Deal?

Buying a home or condo is an exciting event, but one that can leave many homebuyers wondering if they got a great deal. Following are four questions that you should ask yourself to help determine whether or not you’re prepared to find the right deal for you.

1. What does a great deal look like to me?

Before you enter the Grand Strand real estate market take a moment to decide what a great deal looks like to you. Consider this both in terms of your finances and your purchasing goals. This will help minimize the emotion swings as you begin viewing homes and make your decision process much more sound.

2. Do I have a purchase strategy?

Begin with a good strategy and don’t fly by the seat of your pants when purchasing a home or condo. A good place to start is with a professional real estate agent. Consult with your agent to determine the type of properties and seller concessions that are available in today’s market. A good agent will then help you and the lender to make sure you are taking advantage of all possible financing options from seller contributions and obligations to market incentives.  The best advice for sure is to secure loan approval and to make sure your real estate agent and lender are on the same page before you begin your home or condo search. Knowing how much you can spend, what you will need for funds at closing and what you will want to negotiate with the seller will save you a lot of time, and give you a stronger bargaining position for the home or condo that you want.

3. Do I understand the current real estate market in a way that gives me leverage?

It’s not just mortgage interest rates that are important. You should have a good understanding of the local real estate market for the area in which you desire to purchase. A professional real estate agent can provide you with comparable market data that includes lots of information from recent sales prices, sales to list price ratios that can give you a good supply and demand snapshot, property descriptions, property improvements, days on the market, type of financing, date closed, seller concessions, and more. This information is vital in helping assist you with making an informed decision for the right offer for the home or condo you want to purchase.

4. Do I have good resources to educate myself about the market?

A good place to start is right here on The Hoffman Group blog. Our blog will provide you with more information than any other real estate source in the Grand Strand when it comes to local market trends and real estate information. The next step is to understand the role your agent plays in representing you. Here is a good infographic to help you see what your agent is doing on your behalf.

If you’re thinking of purchasing a new home or condo in the Myrtle Beach area, check out our free white paper, Myrtle Beach Real Estate: 5 Things You Should Know, to get some great information about the home buying and selling process.

Grand Strand Residential Inventory Rising

Grand Strand Residential Outlook

The inventory for residential homes in the Grand Strand area is showing an upward trend that has continued from the end of 2013. Per MLS (Paragon) as of April 11, 2014 there are 5,168 residential homes on the market in Horry and Georgetown Counties.  This is typical to see an upward tick due to the season, but this is the highest number of listings on the market in the last four years. The buzz on the street amongst area real estate professionals is one of continued optimism. Many agents are experiencing multiple offers with properties selling within a couple of weeks.

There is a continued pattern for solds as well. Last month there were 480 residential sales per MLS (Paragon) in Horry and Georgetown Counties. This is considerably higher than the previous year.

The breakdown of residential inventory in the Grand Strand is as follows (as of April 11, 2014):

  • 1,296   listings between $100,000 – $200,000
  • 955   listings between $200,001 – $300,000
  • 545    listings between $300,001 – $400,000
  • 252   listings between $400,001 – $500,000
  • 140   listings between $500,001 – $600,000
  • 105   listings between $600,001 – $700,000
  • 76    listings between $700,001 – $800,000
  • 284  listings from $800,001 and up

Condo sales, though a slow start for the year, are beginning to match the results of the last few years as illustrated in the above chart. February sales activity was off by approximately 13 percent while March was just below the figures over the last two years. The decline in February was attributed to a slightly harsher winter than normal, the attrition of distressed condos, and lower sales prices on non-distressed condominiums.

Market Update

There has been plenty of good news in the financial markets through Thursday of this week. Last week the weekly Initial Jobless Claims fell by 32,000 in the latest week to 300,000. This was near a seven year low and a signal that the labor markets may be coming out of hibernation with spring upon us. In addition, the 4-week moving average of claims also fell. Meanwhile, the Consumer Sentiment Index for April came in above expectations, which shows that consumers are feeling positive about the economy as we head into the summer months. Continue reading