May 18, 2014 in City
Tom Kelly: Younger buyers, rental pool fuel second-home rebound
If the plan is to eventually change lifestyle, more people apparently have started the audition earlier in their lives.
According to the recently completed HomeAway Vacation Owners Report, the average age at which owners purchased their vacation home was 47 years old – seven years younger than owners just two years ago. The average age at which owners began renting their vacation homes was 50 years old – the same as in 2013 but six years younger than owners in 2012.
So, are people more determined to take time off and experience pleasant memories with their children? Or, are they sold on a vacation home as a solid investment? Perhaps they purchased their retirement home and plan on others paying the mortgage and maintenance until they can quit the workforce?
HomeAway, the parent company of the world’s most popular rent-by-owner websites including VRBO.com, found many of the buyers who answered its survey answered “yes” to all of the above. The company also announced the number of rental occupancy dates rose in 2013 from 2012, as did the number of second home sales.
The sales data was consistent with the National Association of Realtors’ 2014 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2013. It revealed vacation-home sales climbed 29.7 percent to an estimated 717,000 last year from 553,000 in 2012.
“Growth in the equity markets has greatly benefited high net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,” said Lawrence Yun, NAR’s chief economist, who expected an improvement in the vacation home market. “However, vacation-home sales are still about one-third below the peak activity seen in 2006.”
According to HomeAway, families are feeling more confident in the economy and the financial markets and thus willing to spend cash on vacations. This confidence has provided a solid rental pool for vacation property buyers who have moved their purchase out of the “personal” column and into the “investment” column.
“More families and groups are traveling each year to stay in vacation rentals across the world,” said Brian Sharples, co-founder and chief executive officer of HomeAway. “Younger buyers are wise to invest in a property as early as possible to take advantage of the rising profile of vacation rentals. The mutually beneficial notion of paying for a house by renting to others is a concept that I am proud to help champion for our owners and travelers alike.”
The most surprising statistic to emerge from the HomeAway report was the amount of gross rental income. HomeAway vacation rental owners charge a weekly rental rate of $1,520 ($217/night) and take in $27,360 a year, up from $17,500 four years ago. Most owners reserved specific weeks for personal use (including friends and family) yet make their home available to renters for an average of 36 weeks each year.
Buyers often need renters to help offset their costs, particularly in the first few years of ownership. Now with the numbers rising in both the number of potential renters and the amount of weekly rent they are willing to pay, a vacation rental becomes more compelling, especially if it’s in an area your family already enjoys.
Let’s suppose you have been on the fence regarding the purchase of a vacation rental. You have a gut feeling others would rent the place, but you cannot afford to suffer an annual loss from the property. Would $27,360 a year in income influence your decision to purchase a second home?
Second-home owners overestimate the time they can realistically use their property. Academic calendars, family reunions, can’t-miss business trips and basketball tournaments often get in the way of the only time you can everyone together at the beach or lake.
These same owners, however, often underestimate how easy it can be to rent out their homes. Friends from work, church and park leagues will be interested in spending their leisure time in their retreat. That’s because they know and trust the owners’ taste and choices – and will probably enjoy the same environment and experiences that owners find pleasurable.
Plus, both the recent HomeAway and NAR studies show that there’s large group of travelers who would like to take their family on vacation to a similar type of getaway.