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WASHINGTON – April 12, 2017 – In 2016, the U.S. saw the strongest pace of home sales in a decade – but that included a sizeable drop in vacation buyers and an increase of individual investors, according to the National Association of Realtors® (NAR) annual second-home survey.
The survey also found that 2016 vacation and investment buyers were more likely to take out a mortgage and use their property as a short-term rental.
NAR's 2017 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2016, revealed that vacation home purchases last year descended to an estimated 721,000, down 21.6 percent from 2015 (920,000). It's the lowest level since 2013 (717,000).
Investment-home sales in 2016 rose 4.5 percent to 1.14 million from 1.09 million in 2015. Owner-occupied purchases jumped 12.5 percent to 4.21 million last year from 3.74 million in 2015 – the highest level since 2006 (4.82 million).
Vacation sales in 2016 tumbled for the second consecutive year and have fallen 36 percent from their recent peak high in 2014 (1.13 million), says Lawrence Yun, NAR chief economist.
"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," Yun says. "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.
"The volatility seen in the financial markets in late 2015 through the early part of last year also put a dent in sales as some affluent households with money in stocks likely refrained from buying or delayed plans until after the election," he adds.
Tight inventory conditions pushed the median sales price of both vacation and investment homes last year to levels not seen in roughly a decade. The median vacation home price was $200,000, up 4.2 percent from 2015 ($192,000) and the highest since 2006 (also $200,000). The median investment-home sales price was $155,000, up 8.0 percent from 2015 ($143,500) and the highest since 2005 ($183,500).
With home prices steadily rising, an increasing share of second-home buyers financed their purchase in 2016. The share of vacation buyers who paid fully in cash diminished to 28 percent (38 percent in 2015), while cash purchases by investors decreased to 35 percent from 39 percent in 2015 and 41 percent in 2014.
"Sales to individual investors reached their highest level since 2012 (1.20 million) as investors took advantage of record low mortgage rates and recognized the sizeable demand for renting in their market as renters struggle to become homeowners," said Yun. "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."
The 2017 Investment and Vacation Home Buyers Survey can be ordered online or by calling 800-874-6500. The report is free to NAR members and accredited media and costs $149.95 for non-members.
© 2017 Florida Realtors. All rights reserved. Reprinted with permission.