• by Thom Forbes  @tforbes, April 2, 2015

The vacation home market is booming, thanks to Boomers attracted by low interest rates, a robust stock market and looming retirement from the daily commute. The National Association of Realtors says sales of second-home properties last year reached an estimated 1.13 million and accounted for 21% of the number of homes bought in the U.S., the highest market share since the Investment and Vacation Home Buyers Surveywas first conducted in 2003.

“Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment,” according to Lawrence Yun, the NAR’s chief economist. “Furthermore, last year’s impressive increase also reflects long-term growth in the numbers of Baby Boomers moving closer to retirement and buying second homes to convert into their primary home in a few years.”

The sales of investment homes — properties that the purchasers buy but do not personally reside in — declined, however, for the fourth consecutive year. Yun blames rising prices and a decreasing stock of distressed housing ripe for a moneymaking turnaround.

Also on the negative side, prices were down, reflecting a rise in the sales of condominiums with a smaller footprint, as well as a rise of sales in the South, where prices are generally cheaper. The median vacation home price was $150,000, a decrease of 11.1% from $168,700 in 2013. The median investment-home sales price was $125,000, down 3.8% from $130,000 a year ago. 

“Roughly 46% of vacation homes purchased last year were in the South, 25% in the West, 15% in the Northeast and 14% in the Midwest,” reports GreenIndustryPros.com, which points out that “vacation homes often represent a great opportunity for landscape contractors, particularly those providing ongoing maintenance service such as mowing and trimming, lawn care and tree care.”

They also represent opportunity for the likes of building contractors, local retailers, gas stations, interior decorators, cable companies and plumbers.

Fifty-four percent of vacation buyers bought a single-family home, but the share of those buying a condo (27%) or a townhouse or row house (18%) increased from a year ago, according to the NAR release. Forty percent of vacation home buyers purchased in a beach area, 19% purchased in the country and 17% purchased a vacation home in the mountains.

And Airbnb has made the process of renting them out periodically to help cover costs much easier.

“We knew the fundamentals for vacation-home sales were greatly improving in 2014,” Yun tells Bloomberg’s Prashant Gopal. “I did not expect it would be this big of an increase. It shows the buyers perceive that economic conditions will be solid for upcoming years.”

“One-third of buyers plan to use their property for vacations or as a family retreat, 19% plan to convert their vacation home into a primary residence and 13% bought in the hopes the home would appreciate in value, according to the survey,” Jim Weiker reports in the Columbus [Ohio] Dispatch.

There were some warnings about reading too much significance into the relatively small sample size of 1,971 people, however.

“Mark Zandi, chief economist for Moody’s Analytics, suggested that the gains in the report might ‘overstate the strength’” of the market while noting that the numbers ‘should more or less rise over the next five to 10 years’ as the income and number of vacation-home buyers increases,” Kris Hudson reports in the Wall Street Journal. 

But with higher interest rates on the horizon — minimal and gradual as they may go up if Federal Reserve chairwoman Janet Yellen has her way — purchasers apparently are eager to get a deal while the going is good. 

“The bulk of investment buyers (86%) and vacation buyers (85%),” in fact, “reported that now is a good time to purchase real estate,” writes Michael Gerrity for World Property Report. And Cape Cod-area real estate agent Steve Clay tells Bloomberg’s Gopal that there are “17 properties under contract, more than at any one time since [his five-person] team formed in 2009” at Keller Williams Realty in Falmouth, Mass.

“Buyers know they missed the bottom of the market, and now they don't want to miss the bottom of interest rates,” says Clay. “Mortgage people are flooded and appraisers are backed up,” he adds. “It's an indication that the pent-up demand is coming to fruition.”

Not to mention a desire to get out and about in the salty air after being pent-up during the wickedly snowy winter.