- Based on information from the 2012 Investment and Vacation Home Buyers Survey, it is clear that after declining for several years, the sales price for investment properties rose 6.4 percent in 2011 to $100,000 from $94,000 in 2010.
- In 2010, 59 percent of investment buyers paid all cash for the recent purchase compared to 49 percent in 2011 as the typical cost of investment properties increased. However, among those who did use a mortgage, 44 percent financed less than 70 percent of the home purchase.
- Investors in 2011 were active in buying distressed properties that were on the market. Twenty‐eight percent of investment property buyers purchased a home in foreclosure, and 21 percent purchased a short sale property. Just half of investment property buyers purchased a home that was not a distressed property.
- The typical investment buyer plans to own their investment home for only 5 years compared to 10 years in 2010. Forty‐eight percent of investment buyers are likely to buy another vacation or investment property in the next two years.
The first half of the year, the economy progressed at a weak pace—0.4 percent in the first quarter and 1.3 percent in the second. Real estate markets mirrored this trend, with soft residential sales and slowing commercial fundamentals.
However, amidst the slowdown, one area remained positive—apartment properties. With household formation beginning to advance, demand for rental properties has been rising, accompanied by rising rents and declining vacancies.
Primary, vacation, and investment buyers differ in the type of property they purchase:
- 80 percent of primary residence buyers typically buy a detached single family residence. Primary residences are popular among vacation home buyers, as 70 percent purchase a vacation home, however 21 percent of vacation buyers purchased a condo or a duplex for their getaway. Investment buyers are the most likely of all buyers to purchase a condo—29 percent did so.
- Nearly half of primary residence home buyers purchased a home in the suburbs, compared to one-third of investment buyers, and less than a quarter of vacation buyers. Vacation home buyers were more likely to purchase in a rural area and a resort area than other buyers. Investment buyers were more likely to purchase in a small town or urban areas than vacation buyers.
- Investment home buyers typically purchased a home 19 miles from their primary residence, while vacation home buyers are looking for an escape farther away at 375 miles.
- For more information on the Investment and Vacation Home Buyers Survey, click here.
- Buyers who purchased a home in 2010 to use as their primary home were typically the youngest buyers compared to vacation home buyers and investment home buyers.
- Vacation home buyers typically had the highest median household income at $99,500, compared to investment buyers at $87,600 and primary home buyers at $69,600.
- Vacation home buyers are slightly more likely to have at least two income earners, while investment buyers are slightly more likely to have less than two income earners in their household. Primary home buyers are equally split between having two income earners and having only one income earner in their home.
- Investment home buyers are the most racially and ethnically diverse among the types of home buyers—15 percent of investment buyers are Asian or Pacific Islander.
- For more information from the Investment and Vacation Home Buyers Survey, click here.
- In 2010, based on data from the NAR Investment and Vacation Home Buyers Survey, 73 percent of homes bought were to be used as primary residences, 17 percent as investment properties, and 10 percent as vacation homes.
- Many regions in the country are showing much higher shares of investment home purchases, however during the 2010 time period, there was an influx of first-time buyers and move up buyers from the Home Buyer Tax Credit.
- In 2005, there was the smallest share of primary residences bought, just 60 percent in the last seven years. In 2005, there was also the highest share of investment properties purchased, at 28 percent.
- In 2006, the highest share of vacation homes purchased at 14 percent.
- For more information from the Investment and Vacation Home Buyers Survey, click here.
According to the REALTOR® Confidence Index, there has been a high share of all-cash home purchases in this market—the latest monthly data shows 31 percent of purchases were all-cash, in fact. To make sense of the high number of all-cash purchases, it is worthwhile to look at several sources of NAR data to view the complete picture.
- Investor purchasers have risen in recent months. In March, 22 percent of all existing home transactions were to investors.
- A good portion of the investors are likely to be REALTOR members based on the fact that REALTOR population historically have had a notably higher percentage of second home and investment home ownership compared to the general population.
- The most recent data suggest 43 percent of REALTOR members had at least one investor property.
- Lifestyle factors continue to be the primary motivation for vacation-home buyers, with the desire for rental income driving investment purchases. Vacation homes were more likely to be located in a rural area, while investment homes were more likely to be in a suburban location.
- The typical vacation-home buyer in 2010 was 49 years old, had a median household income of $99,500 and purchased a property that was a median distance of 375 miles from his or her primary residence; 31 percent of vacation homes were within 100 miles and 41 percent were more than 500 miles.
- Currently, 40.7 million people in the U.S. are ages 50-59 – a group that dominated sales in the first part of the past decade and established records for second-home sales. An additional 43.8 million people are now in the primary buying demographic of 40-49 years old, while another 40.4 million are 30-39.
- The 2011 Investment and Vacation Home Buyers Survey can be downloaded here: http://www.realtor.org/prodser.nsf/Research
Rentals at College Towns
Many colleges and universities are already reporting record high applications and enrollments at their campuses. Unless a school is purposely trying to downsize (going for quality rather than quantity) the simple statistics of an ever-increasing number of people high school age (15-to-19 years old) assures a steady, rising stream of potential college students in the near future. The conversion rate from high school to college enrollment is no doubt rising, not because of better scholastic achievements but because of social pressure to attend college and from easier access to student loans and grants.
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