The real estate market for vacation and investment homes boomed in 2011, according to an annual report released today by the National Association of Realtors.
Combined sales for vacation and investment homes reached a six-year high in 2011, while sales for owner occupied homes declined, according to an annual real estate market report released today by the National Association of Realtors.
Sales for investment homes surged more than 64 percent to 1.23 million in 2011, up from 749,000 in 2010, according to the association’s 2012 Investment and Vacation Home Buyers Survey. Sales of vacation homes rose 7 percent to 502,000 in 2011, an increase from the 469,000 in 2010, but owner-occupied purchases fell 15.5 percent to 2.78 million – a decline that reflects the difficulty many potential buyers face in obtaining mortgages, according to said Lawrence Yun, chief economist for the association.
Vacation home sales accounted for 11 percent of all transactions in 2011, up slightly from 2012, while investment sales comprised 27 percent – a 10 percent jump over last year, according to the report, which indicates that depressed home values, low interest rates and rising rents are making the real estate market increasingly attractive to buyers with cash. According to Yun, 41 percent of investors purchased more than one property.
“During the past year investors have been swooping into the market to take advantage of bargain home prices,” he said. “Rising rental income easily beat cash sitting in banks as an added inducement.”
Distressed homes accounted for half of all investment home purchases in 2011, and for 39 percent of vacation homes, said the report. All-cash purchases accounted for nearly half of the investment-home transactions and 42 percent of vacation-home sales.
“Clearly we’re looking at investors with financial resources who see real estate as a good investment and who aren’t hesitant to use cash,” said Yun. Rental income motivated half the investors, and about one-third said they wanted to diversify their investments or saw a good investment opportunity.
The real estate market looks attractive to a significant share of high net worth investors surveyed by Millionaire Corner in the fourth quarter of 2011. Forty-five percent said they believed that “now is a good time to invest in real estate.”
The high net worth – individuals with investable assets of $5 million to $25 million – tend to have sizable real estate holdings. Nearly all – 97 percent – own their own home and 40 percent own a second home or vacation home. About one-in-five owns undeveloped land and residential rental property. About 10 percent own commercial real estate and other types of investment real estate.
Investors with $25 million or higher are even more likely to own real estate, according to a Millionaire Corner study conducted in 2010. Nearly all own their own home, while three-fourths own a second home or vacation home and 46 percent own a third home or vacation home. Nearly half have residential rental property, and about 45 percent have undeveloped land and commercial property.