Interesting story here:
Is 2009 the Time to Buy a Second Home?
Commentary by Curtis Seltzer
RISMEDIA, January 19, 2009-Second homes in America have become as American as apple pie. A beach house, small farm, spot on a lake, condo in a recreation destination-some nine million of us own such places.
A National Association of Realtors’ (NAR) survey indicated that about 740,000, or about 12%, of all existing- and new-home sales in 2007 were vacation homes. That was down about 31% from 2006 sales of 1.067 million vacation properties. The Realtors’ 2008 survey will be available in early April at www.realtors.org. If you are looking to rent your vacation home, you may want to take a look at some of these vacation rental marketing tips.
Despite a 31% decline in sales, the 2007 NAR data also showed that the median sales price of vacation homes from 2006 to 2007 dropped only 2.5%, to $195,000. In the first part of this Recession, vacation homes held their market value even though sales fell by almost one-third in one year.
Almost half of the vacation homes NAR surveyed were in small towns (17%) and rural areas (30%).
Anecdotal evidence suggests that vacation-home sales continued to fall at a faster rate in 2008 than their prices.
Vacation-home prices have also held up better than metropolitan housing, which dropped 20% in the 20 largest metropolitan areas tracked by the S&P/Case-Shiller composite house price index in the 18 months following a mid-2006 high.
In addition to second homes, rural areas are a market for owner-occupied housing. Resident homeowners are both born-heres and come-heres, such as retirement relocators.
Prices for rural, owner-occupied houses have risen slightly more than 2% since early 2007, according to data gathered by the Office for Federal Housing Enterprise Oversight (OFHEO) and cited in a recent report from the Federal Reserve Bank of Kansas City. Non-metro (rural) housing prices ran counter to price declines in metro areas.
Why have second homes and owner-occupied rural housing proved more price-stable than metro housing during the last two years? Several reasons come to mind.
First, as the Kansas City Fed points out, lending practices in rural areas did not follow the now-troubled, bail-out banks into no-doc loans, 100% financing, foreclosure-guaranteeing ARMs, subprime predatory lending and the rest of it. Second, rural economies that depended on agriculture and energy have so far been hit less hard than urban manufacturing centers and once go-go residential markets like Phoenix and Orlando. Third, rural housing prices were not artificially inflated by speculators or panic-driven buyers who feared that they had to buy before they were left behind.
But the last quarter of 2008 and 2009’s first six months will probably show price weakening in vacation homes and rural owner-occupied housing. Inventory of unsold property has piled up, and all-collar unemployment is squeezing everyone’s ability to carry a mortgage. The market will force prices lower to find buyers as this Recession roosts on our heads like a catatonic hen.
In circumstances like these, as ugly as it sounds, buyers of second homes and other rural property will nose around for opportunities amid the distress. Where might value be found?
Search in second- and third-tier recreation areas. If you’re cost conscious, you might want to avoid high-priced recreation destinations and steroidal resorts. The best buys may still not have shaken out in the most popular second-home communities such as Asheville, North Carolina, Park City, Utah, Ashland Oregon and Myrtle Beach, South Carolina-all of which were top-ten, second-home destinations in recent years.
The best buys will be in nice places that have yet to be turned into trendy destinations. Look for small towns that are still about one-third pickup trucks and have no yak-butter crepe place.
Look for the hot spots of pain. Some second-home communities that saw the highest price appreciation rates since 2002 are likely to be corrected the hardest. Not every over-priced property will be knocked down, but a few will. Look for the newly fallen apple, not the one that’s lashed on the topmost branch with steel cable.