TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/134983
feature SERVICING Or ig i nat ion s e r v ic i ng Gobbling up the Getaways With prices for vacation homes finally starting to rally, would-be buyers are packing up their bags after packing in the deals. And dropped they had. By 2011, the value of vacation homes in the Colorado town known for its world-class skiing in winter and summers of fly-fishing, hiking, and mountain biking had fallen a whopping 25 percent off its 2008 peak. A home that sold for more than $1 million in 2008 was down to $861,000 in 2011. But sometime last year, prices began stabilizing and buyers were suddenly as plentiful as wildflowers in a summer meadow. While housing prices have yet to completely rebound (that vacation house that cost more than $1 million in 2008 has crept back up to $910,204), vacation home inventory in Breckenridge has declined 25 percent, and homes that had been sitting on the market 270 to 355 days are now being snapped up in 30 to 60 days. "The buyers I saw returning to the market were people I had been speaking to for three or four years," said Deininager, a partner with Breckenridge Associates Real Estate. "They wanted to watch what the market was doing. They didn't want to [buy] if the market was going to shave another 10 percent off. They didn't want to jump in until prices had rounded the corner." Across the country—from Miami to Cape Cod, from Long Island's Hamptons to California's beaches—vacation home sales, along with prices, are back. According to the National Association of Realtors' (NAR) 2013 Investment and Vacation Home Buyers Survey, 2012 vacation homes sales increased 10 percent over 2011, while the median home price jumped 24 percent. But before you get too giddy, NAR statistics also show that last year's transactions still fall well short of vacation house sales during the peak years of 2005 and 2006. In fact, 2012 sales are below those of 2007. "I think that in 2014, you are going to see a lot more vacation home and second home purchases," said Tanya Marchiol, CEO of Team Investment, a Phoenix, Arizona, real estate investment firm. "The good news for real estate is that people are more confident with their wealth and the recovery they will begin to purchase more luxury items like vacation homes, second homes, investment properties, and that kind of thing." Of course, some lows are good, such as mortgage rates and housing prices. Add a wide selection of great houses in some the country's best vacation spots, and you have the makings of a sales spike. According to the NAR report, 38 percent of vacation home buyers bought last year because they felt the price was right, while more than three-quarters of those interviewed plunked down their money because they believed it was a good time to buy real estate. "We can see an excitement in buyers that we haven't seen for years," said Kim Clark, owner and broker of Bayside Realty Consultants in East Dennis, Massachusetts. "Also, sellers are becoming more confident that it's time to sell. These positive attitudes, plus the low interest rates, are going to make a great 2013." Demand Is Deepening I n its survey, NAR found that American household net worth has recovered to 2006 levels, which explains at least in part the surge in vacation home purchases. Yet for many Americans, the recession's profound financial pain is still very real. So, who is buying vacation homes? In reality, a very select group of upper middle class and wealthy professionals who have the discretionary cash to spend. "We are looking at upper middle class and wealthy" buyers, said Mark Pordes, COO of Pordes Residential Sales and Marketing in Miami Beach, Florida. "The vacation home buyer has come back The M Report | 53 se c on da r y m a r k e t O ver the course of four years, clients kept asking Pete Deininager if real estate prices had bottomed out. Each time, Deininager, a Breckenridge, Colorado, broker, gave them the same answer: "Still dropping." a na ly t ic s By Bob Calandra