THE BOOM IN SECOND HOMES
New wealth brings surge in two-home families
By Thomas A. Fogarty USA TODAY
One home is not enough.
Aging baby boomers seeking havens for their fast-approaching golden years are spending enormous sums of stock market-generated wealth for second -- and in some cases third or fourth -- homes. In doing so, they have bid up prices in prime resort and retirement areas to new highs.
Nearly 800,000 homes sold in 1999 were bought by people whose primary residence was somewhere else, according to a nationwide analysis by Acxiom/DataQuick for USA TODAY.
Some of the sales involved buyers simply interested in being landlords. But a majority of second-home buyers are seeking a place for retirement, vacations, weekend getaways or part-year living, real estate experts say.
'Most people who are buying second homes now are at the peak of their earnings, and they just want a place to hang out on weekends,' DataQuick analyst John Karevoll says. Among DataQuick's findings:
* 13% of home sales were second-home purchases in 1999 vs. 8% just
four years earlier.
* 38% of second-home sales in 1999 involved no mortgage, meaning the
buyers paid cash. That's about three times the rate of cash home sales in
the overall residential real estate market.
* The median price for second homes in 1999 -- half cost more, half less
-- was $92,000, up 19% from four years ago. That compares with a 15%
price increase for houses generally.
* The numbers are bigger in California, which represents more than
one-fifth of the nation's residential real estate market. There, 16% of sales
last year involved a buyer who lived somewhere other than at the new
home. The median price for second homes in California in 1999 was a
whopping $146,000.
* Seasides, mountains and deserts were particularly popular with
second-home buyers. Second-home markets were especially active in Big
Bear Lake, Calif.; Sanibel and Captiva, Fla.; and the Nevada and
California sides of Lake Tahoe.
* Highest-priced second-home hotbeds include Carmel, Calif.,
Sanibel-Captiva and oceanfront neighborhoods in Honolulu. In one
seaside zip code in Carmel, the median sale price for second homes was
$643,500.
Buyers' tastes are changing, too, says Layne Morrill of Branson, Mo.,
former president of the National Association of Realtors.
'It used to be that people were looking for a cute little cabin -- one or two
bedrooms, a sleeping porch and a teeny bathroom,' says Morrill, who has
been selling vacation properties in southern Missouri for 40 years.
'Now, they want all the amenities in a second home they have in their main
home.'
Making the move
before retirement
U.S. Highway 21 ends in the lush greenery of Fripp Island, S.C. The
island appeared as Vietnam in the movie Forrest Gump and provided
backdrops for The Prince of Tides and the live version of The Jungle
Book.
Island real estate executive Jay Lloyd says the character of the island,
where home prices start at $150,000, has changed over the years from a
retirement haven to a magnet for mid- and late-career boomers seeking a
place to kick back at least part of the year.
'They're going for quality of life,' Lloyd says. 'They're not willing to wait
for retirement. They have the wherewithal to make the move now, so they
do.'
Gary and Chris Flynn, both in their 50s, steal away to Fripp Island from
their home in Reston, Va., whenever Gary sees a clearing in his business
travel schedule.
Flynn, a self-employed marketing consultant, and his wife bought their
three-bedroom cottage in 1998. They wanted a place to escape the
congestion of northern Virginia, and they wanted to test the waters for a
possible place to retire.
Last year they bought a second cottage, next door, on Fripp as a rental
property. Ultimately, the Flynns say, they might sell both cottages to allow
themselves to buy a bigger place.
A former career aviator in the Marine Corps, Flynn says multiple home
ownership isn't the exclusive province of the super-rich. For him, it's an
issue of putting some money that otherwise might be in a brokerage
account into something that can be enjoyed.
'If I can do it, most people can,' Flynn says. 'You just have to have the
time (flexibility), and you have to be willing to take a bit of a risk.'
A 1997 tax law change might be playing a role in the second-home boom,
says Mark Calabria, an economist with the National Association of
Realtors.
Now, a couple who lived at least two years of the previous five in a home
-- primary residence or vacation property -- doesn't have to pay capital
gains tax on the sale of the home until their profit exceeds $500,000.
Don and Sally Brink of Flanders, N.Y., spend the coldest months of the
year at their oceanside condo on Fripp Island. Don, 52, is busy during the
growing season with his business of moving and transplanting trees on the
east end of New York's Long Island. Sally, 51, took early retirement from
her job as a teacher.
The Brinks maintain their place on Fripp essentially for free. Rental income
during months the Brinks are home on Long Island roughly cover the costs
of keeping the place.
But the Brinks got in before the boom. They bought their condo in 1991
for $80,000, a fraction of what the property would fetch today.
Business side
of the purchase
Christopher Cain, a writer in Orlando who specializes in second-home
ownership, says it's rare for a vacation property to generate enough
revenue to cover the cost of ownership. And it's a common mistake for
people to overestimate seasonal rental income and underestimate costs
when they buy their little piece of paradise.
'It's a lot more expensive and involved' than most people expect, Cain
says. 'If you can make the finances a wash, you've got a dynamite
investment.'
The U.S. housing market has set volume records each of the past four
years, but the National Association of Realtors is predicting that the
market will cool this year. NAR is projecting existing-home sales in 2000
of about 4.9 million, down from 5.2 million in 1999.
Calabria, the NAR economist, expects sales of second homes to follow
the broad market trend and decline slightly.
At the same time, he says, prices of second homes are likely to continue to
appreciate faster than the general housing market.
Pushing prices higher is the fact that many of the most desirable areas for
second homes are fully developed.
And in places that aren't fully built, anti-development sentiment is limiting
growth and increasing the price of vacation and getaway homes.
In addition, Calabria sees no change in the underlying economic and
demographic conditions fueling boom in second houses.
'This is going to be a strong market for several years,' he says. |
