This month, I want to highlight the second home market, specifically those houses purchased for vacation homes or for future retirement homes. In the next article I will address homes bought for use as investment properties strictly for rental use, which involves an entirely different set of issues.
While second homes are not tracked specifically in the Black Mountain area, it is interesting to note that of the current 650 Montreat homes; only 150 of them are listed as full-time residences. That statistic alone points to the importance of this month and next month's topics.
Nationally, 36% of all existing and new residential transactions in 2006 were for combined vacation and investment home sales. All of the figures I am using here are provided by the National Association of Realtors (NAR). This surprising figure actually represents a decline from the 40% market share reported in 2005. And to break that down even more, 14% of all homes purchased in 2006 were vacation homes, up from 12% in 2005.
Vacation home sales rose 4.7% nationally to 1.07 million homes in 2006, up from 1.02 the previous year. In contrast, primary residence sales fell 4.1% from 4.82 million in 2006 to 5.02 million in 2005.
So who is buying these vacation homes? According to a NAR national survey, the typical vacation home buyer is 44 years old with a median income of $102, 200. And the vacation home price for 2006 declined 2% to $200,000. In that same survey, roughly 80% of those responding indicated that they purchased their home primarily as a family retreat and vacation home as opposed to an investment or other reason.
It may come as no surprise, given our recent area growth, to find that 38% of vacation homes purchased nationally are located in the South. And while as I mentioned there are no specific numbers tracked our region, at least one area observer confirms that he has noted a significant rise in second homes in our area as well.
Wendell Begley, president of the Black Mountain Savings and Loan, estimates that his company has seen a 20 to 25% increase in requests for second home mortgages over the last couple of years. And he notes that while the interest used to center on Montreat and other conference centers, he now sees Black Mountain and especially the area south on Highway 9 as seeing increased interest in this market.
Lenders often have a different set of criteria for second home mortgages, Begley observes, and it is not unusual for mortgage rates to be ½ to ¾% higher than they are for primary residences. In addition, typical financing requirements for second homes call for 20% down payment and financing of 80%. And that figure doesn't seem to be causing much difficulty with his customers.
"Now folks tend to put down more cash," Begley says. "Now our typical financing is more like 30 to 40% down."
Despite the slightly higher interest rates and the larger cash down requirements, the vacation market should continue to grow, and particularly in our area. National experts such as David Lereah, NAR's chief economist, attribute the increase in vacation home purchases to demographics and lifestyle factors. And with the increasing number of baby boomers reaching middle age and looking for a special vacation home for their families, I feel as if the Black Mountain area will continue to see more and more people coming to appreciate our area.