In Kenneth Harney’s article Baby boomers fuel surge in second-home market [Columbus Dispatch] he discusses the 2nd home market phenomenon whose activity has more than doubled since 2001 reaching 881,000 purchases in 2004 alone.
When Congress amended the federal tax code in 1997 to permit as much as $500,000 (for married couples filing jointly) and $250,000 (for singles) of gain on the sale of a primary home to be spared from taxation, Chung said, “Homeowners did not have to buy expensive (replacement) homes anymore.”
Before 1997, the only way to avoid capital gains was to trade-up. Downsize an existing home and use the proceeds to buy a second home. Plus, baby boomers are in their peak earning years and will continue to drive this market for at least another decade.
However, in June Fletcher’s piece: Buyers Need to Choose Wisely When Purchasing a Vacation Home [REJ]
So, vacation-home buyers, take heed: The days when you could flip a beach house or ski place for fun and profit are probably over. That doesn’t mean that you should avoid a second home altogether, but it’s time to take a serious look at the economic factors that propel vacation markets, and to weigh the financial costs of ownership.
But as Vivian Marino writes in last Friday’s Water, Water Anywhere [NYT] second homes located near the water seem to be doing well.
Perhaps in the softer real estate climates these days, it really is all about location.