The Investment Market

A new article shows that investment and vacation properties make up 36% of the residential real estate market!

A new study shows sales of second homes surged in 2004, and that investment property and vacation homes make up a significant portion of the overall housing market, accounting for more than one-third of residential transactions, according to the NATIONAL ASSOCIATION OF REALTORS®.

The new study, based on two surveys, shows that 23 percent of all homes purchased in 2004 were for investment, while another 13 percent were vacation homes. In addition, there was a record of 2.82 million second home sales in 2004, up 16.3 percent from 2.42 million 2003. The investment-home component rose 14.4 percent to 1.80 million sales in 2004 from 1.57 million in 2003, while vacation-home sales rose 19.8 percent to 1.02 million in 2004 from 850,000 in 2003.

Why is this happening???

Appreciation....
-- Residential prices across the country rose 11.2 percent last year, the fastest rate in a quarter of a century, according to the Office of Federal Housing Enterprise Oversight's most recent house-price report.

The largest annual price gain of 36.2 percent was recorded in Las Vegas, NV; the Washington, D.C., area was 26.9 percent higher than a year earlier. Certain counties in the Metropolitan Area are finding property appreciation to be as high as 37%.

What's the downside??

Lereah said analysts looking for signs of weakness will be disappointed. "In the handful of areas with price declines, none had previously experienced rapid price growth," he said. "In fact, they were all lower-cost areas experiencing one or both of the conditions necessary for temporary price softness ' local economic weakness, mainly in jobs, or a large supply of homes available in the local market."

Investor Confidence

Ninety-two percent of all second-home buyers see their property as a good investment. In addition, 38 percent said it was very likely they'd purchase another home within two years, breaking down to 47 percent of investment buyers and 16 percent of vacation-home buyers.

Investment properties of recent buyers tend to be located close to the primary residence of owners, with a median distance of 18 miles, while vacation-home buyers were at a median distance of 49 miles.

These are all reasons why homeowners should know the value of their home in today's market. I am happy to send you a market conditions list of your area as well as a free CMA (comparative market analysis). Simply fill out the form on my website and I'll get that out to you. Knowing a home's value benefits everyone in your subdivision/area. Often times home owners who wish to sell their home on their own miscalculate the value and either over-price or under-price it. This can hurt sales in your subdivision/area as DOM (days on market) reflect value trends. IF a home is over-priced and sits on the market for a long period of time, this can put up "red flags" to potential buyers. Another downside to incorrect value pricing is the affect it has on appraisals.