Unlike the traditional housing market, luxury vacation housing has not been as impacted by the recession
With the economy showing stronger and surer signs of recovery, the wealthiest Americans are starting to spend again like it’s 2007. According to our research, three-quarters of households with a net worth of $25 million plus (not including primary residence) own a second home or vacation home. This is up from 67% four years ago. Almost half own a third home or vacation home, up from 35% in 2007. The percentage of those with time shares and vacation clubs has almost doubled.
But rather than conspicuous consumption, there may be a different recession-influenced mindset at work, observed Michael McFadden, vice president of vacation rentals for LuxuryRealEstate.com, a global network of top brokers and property owners that represent the top luxury properties for sale or rent. “There is an incredible amount of last-minute booking,” he said, “but it’s not a case of the wealthy throwing money away. Each rental is negotiated, not just the price, but additional services. So they may be staying in a six million home, but at a fraction of the cost. They don’t feel shameless (in economically challenging times) or like they need to hide. Instead, they’re going on a nice vacation and feel like they actually got a good value.”
It says something about the luxury real estate market that the magazine Robb Report Exceptional Properties was launched in 2009, the depths of the recession. Today, the magazine is earning a profit, according to editor Bob Morris. “The market has remained fairly active throughout,” he told millionairecorner.com. “It never came to a crashing halt. The people we write about and our readers are typically people who don't just have a vacation home. They have four, five or six homes. They're buying or selling a home or two each year, juggling the place in Barbados for one in St. Barts.
The recession has had some impact on the luxury real estate market, he said. Prices in Florida, for example, dropped up to 30% as opposed to the catastrophic extremes in the traditional housing market. “From what I hear, for the last six months things are getting better,” he said, “but again, it’s couched in that this market was never that awful for the top tier. There was not as much ebb and flow of pricing.”
Many at this wealth level do not rent their second or vacation homes. “That’s just not their kind of thing,” Morris said. “They don’t want anybody else in their homes. The exception may be the Hamptons. People think nothing of paying $100,000 to rent in the Hamptons in the summer. It’s a world in itself between Memorial Day and Labor Day. That’s where the masters of the universe go.”
Especially at this wealth level, it’s all about location, location, location. Aspen and Telluride in Colorado, and Jackson Hole, Wyoming are still second home hot spots, Morris said. South Carolina is popular with golfing enthusiasts. Internationally, he said, “Thailand is on the rise. Despite the political turmoil, it’s gorgeous, the people are nice, and they like Americans”
And there’s still something to be said for keeping that New York penthouse. “A lot of people will have a home in Naples, Florida and a home in Texas and then a penthouse in New York,” Morris said. “That penthouse still has a cachet.”