Who Are the Vacation Homebuyers Now?

The 2023 Real Estate market is experiencing a noticeable shift in the nature of home buyers; first-time buyers are apt to be older than in the past, whereas investment buyers tend to be younger. Reluctant to give up low interest rates of under 3 or 4 percent, move-up buyers are much more undecided than in recent years. Rising interest rates have had a similar effect on the Relocation industry due to employee’s unwillingness to transfer for or with their company. The vacation home market has experienced its own veriety of adjustments. So in this upended Real Estate market, who are the vacation home buyers? Baby Boomers.

evening view large home with swimming pool in front

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Traditionally the vacation or second home market was dominated by middle age families, often with two professional incomes from well established careers allowing ample finances and time for travel and entertainment. The incidence of holding two mortgages and maintaining two residences was not uncommon for many families just a few years ago, but it would seem this is no longer the norm.

The current second home and vacation property market has seen what may be the most surprising shift of all, with retirees and empty-nesters now firmly in the driver’s seat. Cash purchases of second homes as an investment, is an emerging trend that will likely continue until mortgage interest rates fall or level off. Condominiums or multi-unit developments remain popular with second home buyers, owing to outdoor maintenance and community security being the responsibility of an HOA or private entity. But that doesn’t mean that single-family homes are any less desirable in the secondary residence market, especially newly constructed homes.

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The new construction industry as a whole is seeing an increase in older cash buyers, either downsizing or those dividing their time between two locations. Modern planned developments offer a unique quality of life and tend to have a wide array of amenities and services including pools, fitness facilities, gated entrances, golf courses, sport courts and recreational opportunities. Some of the larger associations even provide restaurants and cafes, spas, convenience stores and specialty shops. Still others offer exclusive Active Adult neighborhoods for 55+ within the larger community. In addition, a newly constructed home has the advantage of requiring less maintenance and repair and for that reason alone new construction holds a unique attraction for vacation home buyers.

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For comparrison, take a look at the article and graph below. In 2017 RIS Media released a post detailing the slow-down in the second home and Real Estate investment markets- who was buying vacation properties and where. The slow decline in the market has continued, the ‘where’ remains the same but not the ‘who’. The makeup of the home buyer has changed considerably. The fact that we’re seeing this new trend in second-home buyers since 2017 is attributable in part to an unexpectedly large leap in both home price and interest rates.

Profile: Past Vacation Homebuyers
By Meredith Dunn, Research Communications Manager, National Association of REALTORS®

The 2017 Investment and Vacation Home Buyer’s Survey from the National Association of REALTORS® (NAR) illustrates that while 2016 was a strong year for primary home purchases, the share of vacation homebuyers slid for a third year to 12 percent. Tight inventories and growing home prices made finding a vacation home less affordable last year. However, those that did purchase a vacation home were optimistic: 81 percent thought that 2016 was a good time to buy.

Who did buy a vacation home? Data shows that the typical vacation homebuyer had a median income of $89,900 and bought a home of 1,460 square feet. Many vacation homebuyers wanted beach getaways: the median distance between the primary residence and the vacation home was 200 miles, and 36 percent bought in a beach location, which was the most popular location last year (followed by lake front properties at 21 percent). Many homebuyers also wanted their holiday spot to be some place warm, with 43 percent heading to the Southern states to make their vacation purchase.

The median price for a vacation home last year was $200,000. Over half (56 percent) of vacation buyers bought a detached single-family home, but condos at 22 percent and townhomes/row homes at 21 percent were also popular choices. Thirty-eight percent purchased a distressed sale, and most (72 percent) used a mortgage to finance their home purchase.

While the largest share of vacation buyers, 42 percent, bought their vacation home to use for vacations or as a personal retreat for friends and family, 18 percent bought for future retirement plans.

Investment buyers were more likely to rent out the purchased property, but some vacation homebuyers had the same idea: 29 percent did or tried to rent their property in 2016 and plan to rent their property in 2017. Finally, the optimism about now being a good time to buy carries over into future buying plans: 54 percent of vacation homebuyers consider themselves at least somewhat likely to buy an investment property in the next two years, while 50 percent consider themselves at least somewhat likely to buy another vacation home in the next two years.