Here is a clip of my live appearance on the Friday afternoon edition of Studio B with Shepard Smith on Fox News. [note: a better edited version will be posted Monday]
I spoke about baby boomers buying vacation homes as retirement vehicles.
Here are some random facts or insights that I collected prior to the show:
About 15% of transactions at our firm are second home purchases. In New York City, they are known as pied-a-terres. But they are just as common in Vermont, Florida, North Carolina, Nevada, etc.
People tend to spend less on second homes than on their primary residence. The national median price for vacation homes is $204,100, while for all homes the median is about $220,000. That means vacation homes national median price is 7.2% less than the price of all homes.
When you take a vacation you don’t need the same amount of space because you’re going to be outside skiing, swimming, or whatever. And the idea is that when you retire you don’t need the same sized house as when you had the kids.
In 2005, the NAR reports that 12.2% of home purchases were vacation homes, and 27.7% were investment properties. Some of the investment properties could end up as retirement homes later. 60.1% were primary residences.
Nationally, vacation home sales in 2005 increased 17% over the prior year, to a record of 1.02 million vacation homes, according to the NAR. Those numbers are being driven by baby boomers.
There are 72 million primary homes in the U.S. and 6.6 million vacation homes.
Baby boomers are in their prime earning years. We still have historically low mortgage rates, and it has allowed people to look at a second home.
Baby boomers are inadequately prepared for retirement and are looking at their home, second home, or land as an investment that will pay off later and that can enjoy now.
Baby boomers have expanded the quality of their own lifestyle with less of an eye towards their retirement. That’s why so many are unprepared for retirement. A second home is both a way to prepare and a way to further improve their lifestyle.
The fact that a second home is a tangible asset that they can physically use when they retire or take a vacation has a strong appeal, over investing in stocks for example.
The sales volume is expected to be high over the next decade due to Baby Boomer demographic.
Most buy second homes within 200 miles of their primary home. Beaches or waterfront areas are most popular, then golf, theme parks and winter recreation.
Before 1997, the only way to avoid capital gains in the same of a home was to trade-up. So, people would downsize an existing home and use the proceeds to buy a new primary home and new second home.
Average Home Size Is Growing: 1950: 963 1970: 1,500 2005: 2,400
Average Lot Size Is Shrinking 1980: 9,000 2005: 8,000 That may also be encouraging people to purchase vacation homes, where they can enjoy the outdoors more.