NATIONAL ASSOCIATION OF REALTORS Investment and Vacation Home Buyers Survey 2011 The Voice for Real Estate
2011 NAR Investment And Vacation Home Buyers Survey NATIONAL ASSOCIATION OF REALTORS
2011 NAR Investment and Vacation Home Buyers Survey Contents Introduction... 3 Market Environment... 3 The Motivation for Purchasing a Home... 3 The Investment and Vacation Home Market in 2010... 3 Methodology... 4 Exhibit 1: Investment and Vacation Home Sales and Price... 5 Exhibit 2: Buyer Characteristics... 6 Exhibit 3: Property Characteristics... 7 Exhibit 4: Method of Purchase and Financing... 8 Exhibit 5: Buyer Motivation and Expectations... 9 NATIONAL ASSOCIATION OF REALTORS 2
2011 NAR Investment and Vacation Home Buyers Survey Introduction Traditionally the majority of home buyers make a primary residence their purchase. However, many recent home buyers have taken advantage of record home affordability and have also purchased a vacation home or investment property. The NAR Investment and Vacation Home Buyers Survey breaks down the share of home sales which are primary residences, vacation homes, or investment property and presents several characteristics of the non-primary residence transaction. Market Environment Home sales in 2010 remained near the 2009 level at 5.2 million for new and existing homes. The extension and expansion of the Home Buyer Tax Credit to repeat buyers helped bring buyers who were on the fence into the market. Low mortgage interest rates and record housing affordability encouraged both first-time buyers and move up buyers to purchase a primary residence. The Composition of Residential Sales In 2010, the share of buyers who purchased a primary residence was unchanged at 73 percent. The share of buyers purchasing vacation and investment homes was also unchanged from 2009. Seventeen percent of buyers purchased an investment property and 10 percent of buyers purchased a vacation home. While buyers of primary residences typically purchase homes because of the desire to be a home owner or due to a job relocation, buyers of vacation and investment homes are motivated by other factors. More than 8 in 10 buyers of vacation homes plan to use their property for vacations or as a family retreat. Three in ten expect to convert their vacation home to their principal residence in the future. Investment buyers are most interested in renting their home to others and in taking advantage of a good investment opportunity. The Market in 2010 The Home Buyer Tax Credit made a significant push in sales 2010 55 percent of buyers of primary residences were first-time buyers. The median price of primary residences declined by 4.5 percent in 2010 to $176,700 compared with 2009. There was an increase in the share of primary residence buyers who did not use a mortgage; it rose in 2010 to 19 percent from 15 percent in 2009. The median vacation home price decreased by 11.2 percent to $150,000, compared with $169,000 in 2009. Similar to primary residence buyers, the share of vacation buyers who did not use a mortgage increased to 36 percent in 2010 from 29 percent in 2009. Additionally, more than half of vacation home buyers financed less than 70 percent of their mortgage. About 1 in 10 vacation home buyers purchased a home in foreclosure or through a trustee sale. The share of vacation homes purchased in the South decreased, while the share of homes purchased in the West, Northeast, and outside the U.S. increased compared with a year earlier. Looking forward, the typical vacation buyer plans to own their vacation home for 13 years and about one-third of them are likely to buy another vacation or investment home in the next two years. Similar to vacation and primary residence sales, the median sales price of investment properties declined by 10.5 percent to $94,000 in 2010. In the last two years, the share of investment buyers who paid all cash jumped to 59 percent in 2010 from 42 percent in 2008. Among investment buyers who did use a mortgage, 50 NATIONAL ASSOCIATION OF REALTORS 3
2011 NAR Investment and Vacation Home Buyers Survey percent financed less than 70 percent of their purchase. Seventeen percent of properties purchased by investment buyers were foreclosures or when purchased through trustee sales. The typical investment buyer plans to own their investment home for 10 years and more than half report that they are likely to buy another vacation or investment home in the next two years. Methodology In, a sample of households that had purchased any type of residential real estate during 2010 was surveyed. The survey sample was drawn from a representative panel of U.S. households monitored and maintained by an established survey research firm. A total of 1,895 qualified households responded to the survey, accounting for 1,926 home purchases during 2010. Households were sampled to meet age and income quotas representative of all home buyers drawn from the 2010 NAR Profile of Home Buyers and Sellers. NATIONAL ASSOCIATION OF REALTORS 4
2011 Investment and Vacation Home Buyers Survey Exhibit 1: Vacation and Investment Property Sales and Prices Primary Residences Vacation Investment Share of Home Sales by Intended Use 2003 67% 12% 22% 2004 64 11 25 2005 60 12 28 2006 64 14 22 2007 67 12 21 2008 70 9 21 2009 73 10 17 2010 73 10 17 New and Existing Home Sales (000) 2003 4,841 849 1,571 2004 5,106 872 2,003 2005 5,023 1,019 2,317 2006 4,816 1,067 1,646 2007 4,336 740 1,349 2008 3,768 513 1,117 2009 4,038 553 940 2010 3,814 543 867 Pct change 2009-2010 -5.6-1.8-7.8 Median Sales Price 2003 - - - 2004 - $190,000 $148,000 2005 - $204,100 $183,500 2006 - $200,000 $150,000 2007 $199,500 $195,000 $150,000 2008 $196,000 $150,000 $108,000 2009 $185,000 $169,000 $105,000 2010 $176,700 $150,000 $94,000 Pct change 2009-2010 -4.5-11.2-10.5 NATIONAL ASSOCIATION OF REALTORS 5
2011 Investment and Vacation Home Buyers Survey Exhibit 2: Buyer Characteristics Primary Residences Vacation Investment Buyer Age Under 45 67% 40% 50% 45 to 54 16 27 26 55 or older 17 33 24 Median (years) 37 49 45 Household Income (2010) Less than $45,000 23% 12% 15% $45,000 to $75,000 33 20 24 $75,000 to $100,000 20 19 19 More than $100,000 24 50 42 Median $69,600 $99,500 $87,600 Number of Household Income Earners None 6% 8% 9% One 42 31 35 Two 50 53 48 Three or more 3 8 8 First-time and Repeat Buyer Household First-time home buyer 55% - - Repeat home buyer 45 - - Racial/Ethnic Background White/Caucasian 80% 78% 75% Asian/Pacific Islander 9 10 15 Black/African American 6 7 7 Hispanic/Latino 6 8 7 Other 2 1 1 NATIONAL ASSOCIATION OF REALTORS 6
2011 Investment and Vacation Home Buyers Survey Exhibit 3: Property Characteristics Primary Residences Vacation Investment Location of Property Small town 16% 22% 25% Rural area 17 26 17 Suburb/Subdivision 49 24 33 Urban area/central City 18 9 18 Resort area * 19 7 Region of Home Purchase Northeast 18% 19% 21% Midwest 24 15 20 South 36 36 32 West 22 27 24 Outside the U.S. * 3 3 Type of Property Detached single-family 80% 70% 63% Townhouse or row house 6 4 5 Condo/duplex in building with 2 to 4 units 6 13 16 Condo/apartment in building with 5 or more units 6 8 13 Other 3 5 2 Distance from Primary Residence 5 miles or less - 2% 20% 6 to 10 miles - 3 13 11 to 15 miles - 3 8 16 to 20 miles - 4 15 21 to 50 miles - 8 12 51 to 100 miles - 11 4 101 to 500 miles - 27 10 501 to 1,000 miles - 11 5 1,001 miles or more - 30 13 Median (miles) 375 19 * Less than one percent NATIONAL ASSOCIATION OF REALTORS 7
2011 Investment and Vacation Home Buyers Survey Exhibit 4: Method of Purchase and Financing Primary Residences Vacation Investment Purchase Method Through a real estate agent or broker 71% 54% 44% Foreclosure or trustee sale 5 11 17 Directly from owner whom the buyer knew 8 19 20 Directly from owner whom the buyer didn t know 5 10 9 Directly from builder or builder s agent 7 3 2 Other 4 3 8 First Step Taken in the Home Buying Process Looked online for properties for sale Looked online for information about the home buying process Contacted a real estate agent Talked with a friend or relative about the home buying process Drove-by homes/neighborhoods Visited open houses Contacted a bank or mortgage lender Contacted a home seller directly Contacted builder/visited builder models Other 28% 29% 20% 17 11 11 11 13 16 10 9 11 8 8 10 8 6 8 5 4 6 4 7 5 2 2 * 6 11 13 Where Buyer Found the Home They Purchased Internet 33% 27% 25% Real estate agent 26 26 23 Yard sign/open house sign 10 7 12 Friend, relative or neighbor 11 19 20 Home builder or their agent 9 4 3 Directly from sellers/knew the sellers 4 5 6 Print newspaper advertisement 5 9 6 Home book or magazine 3 3 3 Mortgage Financing Used a mortgage 80% 63% 39% Did not use a mortgage 19 36 59 Don't know 1 1 2 Percent of Purchase Price Financed Less than 70% 23 53 50 70% to 79% 17 20 15 80% to 89% 20 17 16 90% to 94% 10 4 5 95% to 99% 17 1 2 100% Entire purchase price 13 5 12 Difficulty of Mortgage Application and Approval Process Much more difficult than expected 18 21 24 Somewhat more difficult than expected 30 30 30 Not difficult/nothing beyond what expected 52 50 45 * Less than one percent NATIONAL ASSOCIATION OF REALTORS 8
2011 Investment and Vacation Home Buyers Survey Exhibit 5: Buyer Motivation and Expectations Primary Residences Vacation Investment Reasons for Purchasing Home To use for vacations or as a family retreat - 84% 16% To diversify investments/good investment opportunity - 25 45 To use as principal residence in the future - 34 10 To rent to others - 27 51 For the tax benefits - 9 13 For a family member, friend or relative - 14 21 Because the buyer had extra money to spend - 11 10 Other - 3 4 Length of Time Buyer Plans to Own Property Have already sold this property 1% 3% 2% Less than 1 year 4 5 11 1 to less than 3 years 6 5 8 3 to less than 6 years 19 11 16 6 to less than 11 years 18 7 14 11 or more years 37 47 31 Don t know 16 22 17 Median 12 13 10 Likelihood of Buying Vacation or Investment Property in Next 2 Years Very likely 9% 14% 31% Somewhat likely 19 20 21 Somewhat unlikely 12 10 14 Very unlikely 53 44 24 Don't know 7 13 10 Now is Good Time to Purchase Real Estate Good time to purchase 68% 80% 77% Not a good time to purchase 16 12 15 Don't know 16 8 8 NATIONAL ASSOCIATION OF REALTORS 9