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Second Homes --
Baby Boomers Love 'Em
back to second home bliss |
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n the Carolinas, the tradition of second home ownership goes back more than 200 years, to the days when middle and upper class families headed to the mountains or the beach to escape summer heat. From those early days through the middle of the 20th Century, homes were generally kept for family use: a place to relax and allow the children (as well as adults) to have more freedom.
The National Association of Realtors reports that sales of second homes, including both vacation homes and investment property, have declined slightly, but remain above historic norms. At the same time, prices of second homes have risen sharply. NAR President Martin Edwards Jr. said the sales data could be deceiving. “Make no mistake, the second home market is extremely hot and will be for some time to come,” he said. “A big jump in second home prices speaks to that, with the typical second home now costing more than a primary residence.”
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ccording to their survey, the median price of a second home in 2001 (both new and existing) was $162,000 that is 26.8 percent higher than the 1999 median price of $127,800. Of course, prices vary widely, depending on the type and location of the property. And, many experts suggest that the strong second-home price increase over the last two years reflects exceptionally strong demand in the more desirable locations.
The NAR reports that a large pent-up demand for second homes was released following tax law changes effective in 1997, which allow most sellers to exclude up to $500,000 in capital gains from taxation. What’s more, the median age of second-home buyers in 2001 was 46, and the median income was $77,700. Seventy-two percent of buyers were married couples – in other words, the baby boomers.
The U.S. Census Bureau estimates there are over 3.5 million recreational homes, including condominiums and time-shares. NAR projects there are comparable numbers of second homes held as rental investments.
Realtors, developers, and homeowners all agree that the reasons for purchasing vacation or second homes have been shifting in recent years. Years ago, families purchased homes for getaways, recreational opportunities, and personal hideaways. They held those properties for many years, passing them down to subsequent generations. Today, prices are appreciating much more rapidly, rental arrangements and property management services are more readily available, and baby boomers are planning ahead for future retirement.
Lisa and Chris Cloyd bought their beach house at South Carolina’s Fripp Island four years ago.
“One reason we picked Fripp is because we’d been going there since we were children,”
she said. “It just wasn’t summer unless I went to Fripp.” The Cloyds
started thinking about
buying a place. “I found
an older house that we
really liked, but
someone got to it before
us. Then, we decided to
buy a home site and we were
going in to sign the papers, when our agent got the call that the deal had fallen
through on the house we originally wanted.” The Cloyds love the five-bedroom home,
designed to accommodate both children and adults.
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For them, the house was purchased
primarily as an investment and they rent it about ten weeks a year, but while it’s appreciating,
they are enjoying the beach, great tennis center, and activities for the children.
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For many people, vacation home living is what keeps them sane. That’s what Charles Alexander says about his second home in Saluda, North Carolina. “Our home in the mountains enables us to get away from the hustle and bustle of weekday work demands and commitments,” he says. “In two hours, we can be sitting on our front porch with a glass of wine and watching the fireflies – and that helps me keep my life together.”
The Alexanders bought their home about ten years ago, after vacationing in Saluda with friends. They stayed at nearby inns, and returned as frequently as possible, but eventually started thinking about how nice it would be to visit more than once or twice a year. “That’s when we started figuring out the financial aspect of it,” Mr. Alexander laughed. He and his wife, Caroline, thought about their many years of traveling, including what they spent, and what they enjoyed about the experiences. They looked at the big questions: “How much will we use it?” and “Can we afford it?”
They factored in all of the pieces of the puzzle, and finally decided that if the second home were no more than two hours drive away from their primary residence in Columbia, South Carolina, they’d probably use it enough to make sense of things, dollar-wise. (Interesting. They were following a fairly standard rule of thumb without realizing it. Many experts suggest that vacation homes be no further than two hours drive away, if you’re counting on most usage being weekend visits.)
Now, Caroline Alexandar works part time and her husband is sales manager for WLTX Television station. But for two to three weekends each month, the couple makes that two-hour drive to their own familiar surroundings in the mountains.
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The U.S. Census Bureau estimates there are
about 3.5 million recreational homes, including condominiums and time-shares.
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For some, a second home permits a bit more experimentation in their decorating. “Either a family wants everything brand new, or they see this as an opportunity to take furniture that’s not exhausted to the second home, and buy the new sectional they really wanted,” says Jackie Hirschaut, vice president of the American Furniture Manufacturers Association.
Harry Redfern, vice president of sales and marketing for the Cliffs Communities near Greenville, finds that many folks from the Atlanta area are acquiring second homes as weekend getaways, with an eye toward retirement some day. "They are building bigger and better, and using agents to rent the property for them," he said, noting that this gives them control and personal use on their terms.
Expect even more pressure on resort property and vacation buying through the next 20 years as more and more baby boomers begin to look for second homes, says the American Resort Development Association. Their report says “there is a trend showing the consumer profile moving up the socio-economic ladder.” It goes on to explain “the typical vacation owner is an upper middle income, middle-aged, well-educated couple.”
Most second-home owners who want to use their property, also want to be within easy driving distance. But there are others who don't mind the drive at all, purchasing property with an eye toward renting it for all but two weeks each year, letting the rentals make the payments, and using those two weeks to get to know the area and decide whether retirement paradise has been found. For these second-home buyers, the distance from the primary to secondary residence isn't as meaningful, because it's only used occasionally. However, experts warn that buyers can’t expect to make a down payment, and then have the property pay for itself all the time. Appliances break down, renters aren’t as careful, and climate can affect renting desirability.
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Perhaps most important is the mindset of Americans in their second home purchasing
years. They want the good life now, rather than later.
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For many second-home owners, their profits will come when they sell, and those profits can be extremely large. For others, the payback comes in the form of familiar, yet exotic surroundings that offer them peace of mind and tranquility.
Horry County, which surrounds Myrtle Beach, one of the biggest second home markets in South Carolina. In the mountains of North Carolina, second homes are tucked into hamlets, lined up along golf courses, or spaced among the hardwoods. Inland, the lakes and recreation areas of both states attract their fair share of second-home buyers, who appreciate the smaller towns and rural life, far away from the madding crowd.
Whatever their personal reasons, the boom in second home purchase has not yet reached its peak. Baby-boomers are aging now, but it will be well into the 21st Century before the last of them turns 50. If health trends continue, these folks will live longer, healthier lives, and spend far more time after retirement than their predecessors.
Perhaps most important is the mindset of Americans in their second home purchasing years.
They want the good life now, rather than later. They plan today for tomorrow's lifestyle changes.
If they can find a way to live in paradise during their working years, so much the better.
And, if they can find a way to use rental resources to help pay for paradise as they're planning
future living arrangements, that's pretty close to perfect!
back to second home bliss
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Katherine O. Pettit has worked as a writer, magazine
editor, printer and public
relations consultant. The Columbia resident has published more than 250 articles
in magazines and newspapers. Her writing explores a variety of subjects including
travel, lifestyles, business and management.
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