While home sales in 2016 were the
strongest in years, the National Association of Realtors® (NAR) said on Tuesday
there was a shift in their composition. Sales of vacation homes fell significantly
while owner-occupant and individual investor activity picked up.
NAR's Investment and Vacation Home Buyers
Survey, which covers sales of both new and existing homes, found that vacation
home purchases fell by 21.6 percent in 2016, to 721,000 from 920,000 in
2015. It was the lowest level of sales
since 2013's 717,000 transactions.
Sales of homes to individual investors rose
4.5 percent to 1.14 million from 1.09 million while owner-occupied purchases
jumped 12.5 percent to 4.21 million, the highest level since 2006, from 3.74
million the year before.
Vacation sales accounted for 12 percent of all transactions during
the year, the lowest share since the 11 percent share in 2012 and down from 16
percent in 2015. The portion of investment sales remained unchanged for the
third consecutive year at 19 percent, and owner-occupied purchases increased to
70 percent (65 percent in 2015).
Yun, NAR chief economist, says it was the second consecutive year in which vacation
sales declined. They are now down by 36 percent since hitting a recent high of
1.13 million sales in 2014. "In several markets in the South and West - the two
most popular destinations for vacation buyers - home prices have soared in
recent years because substantial buyer demand from strong job growth continues
to outstrip the supply of homes for sale," he said. "With fewer bargain-priced
properties to choose from and a growing number of traditional buyers, finding a
home for vacation purposes became more difficult and less affordable last
added, "The volatility seen in the financial markets in late 2015 through the
early part of last year also put a dent in sales as some affluent households
with money in stocks likely refrained from buying or delayed plans until after
inventories, long cited as a problem for primary home sales, were also a factor
for vacation and investment properties as their availability fell to levels not
seen in roughly a decade, pushing prices up. The median vacation home price was
$200,000, up 4.2 percent from 2015 ($192,000), and identical to the 2006 high. The
median investment-home sales price was $155,000, up 8.0 percent from 2015
($143,500) and the highest since 2005 ($183,500).
Higher home prices pushed the use of mortgages higher. The share of vacation buyers who paid fully in
cash fell 10 percentage points to 28 percent compared to 2015. Cash purchases by investors decreased to 35
percent from 39 percent in 2015 and 41 percent in 2014.
"Sales to individual investors reached their highest level since
2012 (1.20 million) as investors took advantage of record low mortgage rates
and recognized the sizeable demand for renting in their market as renters
struggle to become homeowners," said Yun. "The ability to generate rental
income or remodel a home to put back on a market with tight inventory is giving
investors increased confidence in their ability to see strong returns in their
The share of both vacation and investment buyers planning on
renting their properties short term (less than 30 days) rose slightly. Forty-four percent of investors and 29
percent of vacation buyers did or attempted to rent their property last year
and plan to do so in 2017, compared to 42 percent and 24 percent respectively
the previous year. Twenty-one percent of investment buyers and 15 percent of
vacation buyers did not rent their home for short-term purposes last year but
plan to try it in 2017.
typical income of both vacation and investment buyers declined year-over-year,
from $103,700 to $89,900 for the former and $95,800 to $82,000 for the latter. Both
were most likely to purchase a single-family home in the South, with vacation
buyers preferring a beach location and investors choosing a suburban area.
top two reasons for buying a vacation home were to use for vacations or as a family
retreat (42 percent) and for future retirement (18 percent). Investors bought primarily to generate income
through renting (42 percent) and for potential price appreciation (16 percent).
survey was conducted in March 2017 with a total of 2,099 responses from persons
who had bought vacation or investment property in 2016.