In this series, we focus on opportunities fit for individuals left relatively unaffected by the recession, those who still have money to play with and can stomach some risk.
Last year Lydia Voles and her husband, Rick Lepowski, residents of Westchester County, New York, did what few Americans dare to do these days. When the news was all about foreclosure and falling home values, the couple decided to seize the moment and scoop up a second home to serve as their family’s vacation spot.
They choose a three bedroom near the Pocono Mountains in Pennsylvania, a one hour and 45 minute drive from Westchester and a fun place for the couple and their two young sons to spend weekends. They wouldn’t say what they paid, but the couple bets they saved 20% on the sale price buying last year versus in 2007.
“It seemed like the perfect time to invest,” says Voles, who hopes their new investment will, over time, offset the recent losses in their retirement portfolios.
Second-home market experts say the slowdown and low interest rates are creating buying opportunities for those with strong credit and at least a 20% down payment. Banks are traditionally tougher on second–home loan applicants, since if you run into financial hardship your second home is likely the first property you’ll consider defaulting on. Voles and her husband have near–perfect credit and put down 20% in cash, which she believes helped speed up the purchase.
Last year the number of people purchasing a second home—either a vacation home or an investment property to rent out—dropped by 30% from 2007, based on recent data from the National Association of Realtors. In the meantime, the median price of a vacation home fell 23%, from $195,000 to $150,000 in 2008.
Whether you’re in the market for a house by the beach, in the mountains or lakeside, now’s a good time to start looking.
The glut of inventory provides second homebuyers more choice at better prices, says Michael Owen, a realtor and chair of the resorts and second homes committee of the National Association of Realtors.
“You’re likely to get a waterfront property, versus a marginal waterfront view, at a better price. You get more for your money these days,” says Owen, who works out of South Palm Beach, Fla., a resort area that’s seen some of the steepest price drops in the country.
In metropolitan Miami, which includes Broward and Palm Beach counties, year-over-year prices fell 29.5%. South Florida prices have fallen 45% from their peak in December 2006.
As for where prices will likely go from here in South Florida? “Long term, we expect it to maintain a moderate appreciation,” Owen says.
Over in the ritzy Hamptons on Long Island, where many wealthy folks keep second and third homes, prices have sunk more than 23% to a median price of $675,000 in the first quarter, compared with the same period last year, according to researchers at Prudential Douglas Elliman and Miller Samuel.
A recent report by listings site Zillow.com and Businessweek.com found second-home regions with the biggest price decreases year-over-year include Scottsdale, Ariz., where prices were down 27%; Mystic, Conn. with a 17% decline in prices and Sunriver, Ore., where prices fell close to 16%.
5 Great Second Home Locales
Extreme Real Estate: Private Islands
Before You Buy a House with a Friend, Read This