Washington, DC, March 1--A new study shows sales of second homes surged in 2004, and that investment property and vacation homes make up a significant portion of the overall housing market, accounting for more than one-third of residential transactions, according to the National Association of Realtors.
The new study, based on two surveys, shows that 23 percent of all homes purchased in 2004 were for investment, while another 13 percent were vacation homes. In addition, there was a record of 2.82 million second home sales in 2004, up 16.3 percent from 2.42 million 2003. The investment-home component rose 14.4 percent to 1.80 million sales in 2004 from 1.57 million in 2003, while vacation-home sales rose 19.8 percent to 1.02 million in 2004 from 850,000 in 2003.
David Lereah, NAR's chief economist, said earlier studies underestimated the number of second-home sales because a very small percentage of surveys mailed to second-home addresses were returned. "We found excellent results for studies looking at owner-occupied homes, but this is the first time anyone has come up with a methodology for capturing a representative market share for vacation- and investment-home owners," he said. "In fact, given the size of the market, we can assume that many individual owners have more than one investment property."
Previous studies had indicated the total stock of second homes purchased for investment or recreation was 6.6 million units. "The lion's share of second-home sales in earlier studies were vacation homes, and previously reported figures for the total number of second homes in the U.S. coincide with the current figures we have for the number of vacation homes," Lereah said. "However, we've seen a shift over the last few years with a growing number of second-home buyers purchasing primarily for investment. This led us to a new examination and understanding as to how much larger investment homes are as a share of the overall housing market."
