Why vacation home sales soared 16.4% amid the pandemic
Lawrence Yun, chief economist of the National Association of Realtors®, joins Yahoo Finance to break the vacation home sales boom in the wake of the pandemic in the latest NAR report.
ALEXIS CHRISTOFOUROS: Happy to see you again. Vacation homes continue to be a popular commodity as the pandemic creates more opportunities for people to work from home. A new report from the National Association of Realtors shows that vacation home sales rose more than 16% last year, more than three times beating existing home sales.
Lawrence Yun is joining us now in talking about it. He is chief economist at the NAR. Lawrence, good to have you here. So now that more and more businesses are calling people back to the office, are you seeing any signs that this second home or vacation home buying trend is starting to slow down?
LAWRENCE YUN: Good afternoon. Well, certainly the real estate market has garnered a lot of interest in the past year. This still continues into 2021. But the interesting dynamic is that people with this flexibility of working from home, essentially said, working from home can also mean working from a vacation home, while having a spectacular view of the city. water or mountain. . And as a result, we have seen a boom.
Now whether this will slow down or not remains to be seen. But from what we hear from resort areas, demand is still very strong.
KRISTIN MYERS: Lawrence, I was a little surprised with some of the areas where we find people buying vacation homes. For example, in places like Florida, I would have thought that everyone would have bought a house in Miami. And they are not, including even other counties like Alcona County in Michigan, excuse me. I was going to say Maryland for some reason.
So I was a little interested in some of the domains that people buy. Is there a reason why these areas have become hot spots? Is this the price? Is it something about these towns or these towns?
LAWRENCE YUN: Well, a place that Americans would consider it to be essentially a luxury second home market, like in Southwest Florida, Marco Island, Naples, very expensive. Cape Cod, similar to Martha’s Vineyard. But what we also see are cabins in, say, the Lake District, Upper Michigan, Minnesota, as well as the Smoky Mountain region north of Atlanta or you can tell just about the connection between North Carolina, Georgia, Tennessee, very hot place.
People just want to say, well, let’s get out of town, a reasonable drive away. So a pretty amazing trend.
ALEXIS CHRISTOFOUROS: Laurent, and the prices? Are the median prices of these vacation homes increasing faster than the prices of existing homes? Because we have seen that prices in general are still close to records.
LAWRENCE YUN: Home prices are at an all time high and continue to rise. The overall price of homes rose 10% last year. Prices for vacation homes have increased by 14%. Now people are hearing about the prevalence of multiple offers. For a vacation home property, there is more inventory. It is therefore a less rushed decision. People can take their time determining which vacation home fits their lifestyle. There are therefore fewer multiple offers. However, what people are offering and what sellers are willing to accept shows a better appreciation of the prices than for the main houses.
KRISTIN MYERS: About that point, because I think throughout the pandemic so many people have looked to their vacation home and actually used it as their primary residence, especially a lot of people who live in New York City, for example. example, fled to their vacation homes. Are these vacation homes used for this purpose only seasonal? Or do you see people buying these vacation homes and planning to use them as some sort of primary residence, especially as we move into this hybrid work-from-home experience?
LAWRENCE YUN: Before the pandemic, only 5% of the US workforce worked from home. During the confinement period, the number reached almost 1/3. Basically all office workers worked from home.
Now the hybrid is likely to be the case. The exact model, does it come to the office two days a week or two weeks a month with the other two weeks working from home? We don’t know for sure how everything will turn out. Most senior executives will do trial and error. But certainly there will be more working days out of the office.
And their family members, their uncles, their brothers, and so on. So by having a vacation home they are basically trying to move into a second primary residence. And the other weeks, maybe they just let other family members use it who also have that flexible schedule. And therefore, the demand for a vacation home in major destinations, there is a high demand.
ALEXIS CHRISTOFOUROS: Lawrence, what about the inventory? We know it’s so tight right now, especially for primary residences. There was a report the other day showing that we are running out of about 5 and 1/2 million units just to meet demand. So it’s a huge pressure on home builders. What does the inventory look like right now for these vacation homes?
LAWRENCE YUN: The vacation home market has also seen a decrease in inventory as buyers gobble up properties. But the days in the market are longer, which means people don’t have to rush into a decision.
Before the pandemic, the trend in America was for employment in the metropolitan market to increase, while rural areas saw a decline in overall population as well as employment conditions. But everything changes with the pandemic. Now we are seeing people moving out of town into the rural community of the small town.
And I must also point out that a vacation home does not have to be very luxurious. What we also hear are people who just want a little cottage to grow vegetables on the weekend, a different activity – so we see a variety of different types of second homes.
ALEXIS CHRISTOFOUROS: All right, we’ll stop there. Lawrence Yun, Chief Economist at the National Association of Realtors, nice to see you today. Thank you.