WASHINGTON D.C. Are you under the impression that only ski towns and resort valleys have second-home owners? Think again.
The National Association of Realtors reports that vacation properties accounted for 12 per cent of all homes sold last year, and 28 per cent of homes were bought for investment purposes.
Typical vacation buyers last year were 52 years old, earned $82,800, and purchased a property that was a median of 197 miles from their primary homes. This profile differed little from that of investment homebuyers, except that investment homes were likely to be close to the original home.
USA Today explains that this rally in vacation and investment homes began in 1997, when congress changed the tax code, allowing most homeowners to duck capital gains taxes when selling their homes. The exemption is $500,000 for married couples, $250,000 for singles, if it was their primary residence for two of the previous five years.
Before, explains the newspaper, the only way to avoid the tax was to use the gained equity to buy another one of equal or greater value. But now, they can downsize and use the money instead to buy a second home.
But theres something else going on, too. Baby boomers are entering their peak earning years. The most active buyers of vacation and investment homes are people in their 50s. Currently, there are 36 million people in that age bracket. However, with 45 million people in their 40s, the market is expected to remain strong for a long time, says David Lereah, the chief economist for the Realtors.
However, Lereah believes the vacation- and investment-home buying binge will drop to 30 per cent of all home sales, maybe less. He cites higher interest rates, higher lending standards, and slower price appreciation.
Living the nano-dream
ASPEN, Colo. Aspen is like all other ski towns in the West, except exaggerated. There, the locals talk not only of McMansions, but of Garage Mahals.
But the flip side is what might be called the Nanohomes at least compared with the big homes. Aspen Times reporter Jeanne McGovern explored that aspect of Aspen, noting that some 4,500 of the towns residents almost half live in homes that are smaller than the national average.
For the record, that national average has been expanding: from 1,600 square feet in 1973 to about 2,400 square feet as of 2004. Aspen is not a city suburb, but a place of superlatives in almost every way. Because they want to have their children in the good local schools and to avoid the commute, many locals are willing to make this trade-off of smaller homes.