Vacation Properties – Another RealEstate Niche
Posted by Peter Vekselman Thursday, 12 July 2012 05:51 No Comments
Like every other sector in real estate, vacation properties have been drastically affected by the recession. Because vacation homes are purely a discretionary purchase, how much the market is affected is very uneven. Also, where the property is located has a big influence on how much values have dropped.
Take for instance a million dollar luxury ski condo in Vail, Colorado. While the number of sales of these high-end properties is down about fifty percent from the highs in 2005, the values have not dropped much at all. People that can afford these properties are not affected by the recession. Their executive jobs are not at risk. The rising cost of gasoline doesn’t mean they have to spend less on groceries. What has happened is the rich see the overall real estate market declining and select not to invest in a second or third home because of the uncertainty. What has resulted is prices remained stable but the sales volume has been cut in half.
Now consider an oceanfront home in Seaside Oregon. This is not an international or even national vacation destination. However, it is a great get away spot for the middle and upper middle class from Portland, Oregon and sounding areas. These people are hard hit by the recession and very reluctant to buy a vacation home. For these houses, not only is the volume of sales off by fifty percent or more but values have plummeted between forty and fifty percent. Also, a lot more of these middle class vacation homes are going through short sales and foreclosures.
I can give you national numbers such as the NAR reports that 2011 sales of vacation homes are up seven percent over 2010. However, because these niche properties are so extraordinarily affected by local markets the national numbers are meaningless.
The bottom line is there are great opportunities in the vacation property niche for buy and hold investors. Nevertheless, it’s imperative you know the local market extremely well before making an investment decision.
All the Best,
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