Vacation sales in 2016 posted a nearly 22 percent year-over-year drop and plunged to the lowest level since 2013, as buyers were greeted with fewer and pricier choices, according to the National Association of REALTORS®’ 2017 Vacation and Investment Home Survey, which covers existing and new-home transactions in 2016. Sales to investors fared much better.
Vacation sales have fallen 36 percent from their recent peak set in 2014 (1.13 million in 2014 vs. 721,000 in 2016). Last year marked the second consecutive year for declines in the vacation home sector.
“In several markets in the South and West–the two most popular destinations for vacation buyers–home prices have soared in recent years because substantial buyer demand from strong job growth continues to outstrip the supply of homes for sale,” says Lawrence Yun, NAR’s chief economist. “With fewer bargain-priced properties to choose from and a growing number of traditional buyers, finding a home for vacation purposes became more difficult and less affordable last year.”
Vacation and investment buyers were more likely to take out a mortgage and use their property as a short-term rental last year, according to NAR’s study.
Investment home sales strengthened in 2016, with sales rising 4.5 percent to 1.14 million last year. Sales to individual investors reached their highest level since 2012 as buyers sought to take advantage of record low mortgage rates and a growing demand for rentals. “The ability to generate rental income or remodel a home to put back on a market with tight inventory is giving investors increased confidence in their ability to see strong returns in their home purchase,” Yun says.
Tight inventory conditions pushed median sale prices of both vacation and investment homes last year to near decade highs. The median sales price of a vacation home was $200,000 last year, a 4.2 percent year-over-year increase and the highest since 2006. The median sales price for an investment property was $155,000, an 8 percent increase and the highest since 2005, according to NAR’s report.
Vacation sales accounted for 12 percent of all transactions last year, the lowest share since 2012. Investment sales accounted for 19 percent of overall sales, unchanged from last year.
Source: “2017 Vacation and Investment Home Survey,” National Association of REALTORS® (April 11, 2017)