The National Association of Realtors (NAR) reports the Second-home market held steady in 2010

The share of home buyers purchasing second homes remained steady in 2010 compared to the year before, though overall sales volume declined.

The survey found that second-home purchases declined at the same rate as primary home purchases in 2010, both dropping 5.6 percent. Investment properties saw the bulk of that decline, falling 7.8 percent, compared to a 1.8 percent decline for vacation homes.

The percentages of investment purchases and vacation-home purchases to overall purchases remained the same as in 2009, at 17 percent and 10 percent, respectively.

While the overall residential real estate market is still down, sales of vacation homes fared better than sales of primary residences and investment properties in 2010. In fact, some consumers found low real estate prices, attractive mortgage rates and the potential for price appreciation compelling enough reasons to buy more than half a million vacation homes last year, according to proprietary research commissioned by HomeAway, Inc. as part of the National Association of Realtor’s (NAR) 2011 Investment and Vacation Home Buyers Survey.

The research found 38% of vacation home buyers decided to purchase a vacation property last year primarily because of low real estate prices. And 2010 proved a good year to buy, according to the NAR survey. Median sales prices for vacation properties dropped 11.2 percent from $169,000 in 2009 to $150,000 in 2010.

Other vacation home buyers cited the following factors as the most important reason to take the plunge into vacation home ownership last year, according to HomeAway® research:

Wanted a personal family retreat (27%)
Potential for price appreciation (12%)
Low mortgage rates (11%)
Other (13%)


“Vacation homes are more attainable than ever for consumers of all ages, thanks to attractive prices and the fact that people can rent them to travelers to help offset the costs,” says Brian Sharples, chief executive officer of HomeAway. “As the NAR report shows, about four in 10 buyers last year were under the age of 45.”

Vacation Home Owners Believe Rental Income Can Help Offset Mortgage on Second Home
Although few vacation home buyers cited rental income as the most important factor in their decision to buy last year, about seven in 10 buyers (69%) said it influenced their decision. In fact, nearly all (94%) of vacation home buyers say they do plan to rent their property within the next 12 months to either long-term or short-term renters or a combination of the two, and 60 percent of buyers believe they’ll make enough rental income to cover at least half of their mortgage.

Of those buyers, about 44 percent plan to make their vacation homes available for rent between one and eight weeks over the course of the next year; 42 percent plan to rent their properties between nine and 26 weeks per year; and 15 percent plan to rent their homes between 27 and 52 weeks per year.

Vacation home buyers are willing to rent their property to more than one type of guest. The vast majority (74 percent) of people who plan to rent their property to short-term renters say they’ll rent the home to vacationers, while 36 percent plan to rent to business travelers and 23 percent plan to rent to other tenants, such as college students or people who are relocating to the area.

1. Prices down. You can pick up a beach cottage or high-rise condo at extremely good prices. That’s only the beginning. Lower prices and less competition are the tip of the iceberg-sized list of factors that make it a good time to consider a vacation home buy.

2. Interest rates. Rates, of course, are at historic lows. Lock in a good rate, buy a vacation home in a desirable location, and watch your asset appreciate over the long-term.

3. A relatively safe investment. Real estate has proven itself to be a safe place to park your money for the long-term. (Long-term is key). Stock market woes have always pushed people to look for alternate investments, and real estate is a consistent stronghold.

4. Make a profit. Or, better yet, make your vacation home pay for itself. Only planning on using your vacation home a few months out of the year? Rent it out short-term to vacationers looking for a great place to stay. Many homeowners make a killing listing their homes on VRBO.com. (Vacation Rental By Owner). When your monthly mortgage payment is less than or equal to one peak week rental, twelve weeks of rental will cover your mortgage payments for the entire year.

5. Vacation rental demand is heating up. Overall, vacation rentals are less expensive than hotel rooms, especially for longer visits and for families. Savvy travelers know this, and are heating up the demand for vacation rentals. In addition, the weaker dollar makes U.S. destinations attractive to travelers from countries with stronger currencies.

6. The pressure of bidding wars is off. Sure, you may not get bargain basement prices on a beachfront cottage—but you might if you’re willing to buy a few blocks away. Houses aren’t exactly flying off the shelves these days, but buyers now have less pressure to make a hasty decision.