Middle Class Drives Soaring Purchases of Second Homes
By Daniela Deane
Washington Post Staff Writer
Wednesday, March 2, 2005; Page E01
Sales of second homes soared last year and accounted for more than a third of all residential sales transactions, according to a study released yesterday.
The study, conducted by the Washington-based National Association of Realtors, showed that nearly one in four U.S. homes bought in 2004 was purchased for investment purposes; 13 percent were bought as vacation homes.
Together, that constituted the surging second-home market, which accounted for 36 percent of the 7.7 million homes sold in the country last year. Second-home sales were up 16.3 percent over 2003.
Kelly Robinson and Debra Thomas, two office colleagues in Bethesda, were just two of last year's buyers. The women decided recently to team up to invest in real estate together.
A few months ago, they bought their third investment property -- a $225,000, four-bedroom townhouse in Gaithersburg that they now rent out.
And it's people like Robinson and Thomas who are buying homes they're not planning to live in rather than just high-income lawyers and lobbyists. A second survey by the Realtors association found that the typical investment property buyer last year earned an annual salary of $87,500 and was 47 years old. The typical vacation-home buyer was a little older and made a little less -- a 55-year-old making $71,000 a year.
"The second-home market is firing on all cylinders," said David Lereah, chief economist of the Washington-based Realtor group. "And it's middle Americans who are buying, not high-flying investors."
Thomas, a 53-year-old administrative assistant in a busy real estate office, sums up why she decided to turn now to investment property: "I had money in the stock market, but the market always seemed to be going down, down, down. I decided to take that money out and invest it in real estate."
Lereah said baby boomers, the largest generation in American history, are in their peak earning years and they are the ones buying second homes in record numbers. He said American households increasingly saw real estate as an option to other investment vehicles. Historically low interest rates have also fueled the fire.
Even if there is some caution about getting burned, it's not hard to see why Americans have decided real estate can be a good investment.
House prices rose in 2004 at their fastest rate in 25 years, according to a government report released yesterday. The average price of a single-family home financed through secondary mortgage giants Fannie Mae or Freddie Mac rose 11.2 percent over the year, the strongest annual growth rate since 1979, according to the government's quarterly house price index.
The appreciation rate slowed dramatically, however, in the fourth quarter, to 1.7 percent, barely a third of the rate for the previous three months, according to the report.
Second-home sales surged 16.3 percent, to 36 percent of the total market, in 2004, the National Association of Realtors says. (F. Carter Smith -- Bloomberg News) |
