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Second homes gaining ground as investments

From the mountains to the desert, stock-wary investors are putting their nest-egg money into Southland vacation properties

October 27, 2002|Allison B. Cohen | Special to The Times

Glenn and Kristine Quirk once had difficulty scraping together enough for a down payment on one home. But in just two years, the Burbank couple have practically become land barons, having recently closed escrow on their fifth vacation property in Big Bear.

Glenn, 40, a golf course superintendent, started with the idea of forming an investment club with friends to analyze and invest in stocks and bonds. But the group didn't get off the ground until its members changed their focus to real estate.

"That's our whole strategy," said Kristine, 32, a senior marketing manager with Union Bank, "to not have to invest in the stock market."

Like the Quirks, others also are investing in second homes in the Southern California mountains and desert.

"A lot of money that was going into the stock market is now going into real estate," said Christopher Cagan, director of research and analysis at First American Real Estate Solutions of Anaheim. "There's a lot more of an interest in investors moving away from a piece of paper and into hard assets. People want something they can live in."

According to DataQuick Information Services, a La Jolla-based real estate research firm, the median price for a vacation home in Southern California this summer was $198,000, up 21.6% in July from July a year ago. Compare that to the stock market indexes that have plunged this year in the wake of a number of corporate scandals: the Standard & Poor's 500 index down 23.12%, year to date; the Dow Jones industrial average, down 17.01%; and the Nasdaq composite index, down 33.41%.

Add to the mix the lowest interest rates this generation has seen and a strong primary real estate market nationwide and you've got a second-home market that many say appears to be unstoppable.

"Right now there is no other investment out there like real estate," said John Karevoll, a DataQuick analyst.

Are the Quirks and their friends worried about the so-called housing bubble bursting? Right now, they are just enjoying the ride. But Kristine Quirk said she knows the Southern California market can be fickle, although she's optimistic.

"If [the market] does burst," she said, "I know it will bounce back again, even higher."

So far, their plans have paid off. Last month, the group's first Big Bear property -- a 1,000-square-foot, two-bedroom, two-bath residence purchased two years ago for $90,000 -- was re-appraised at $145,000, a 61% appreciation rate.

"All of a sudden," Kristine said, "there was enough equity to buy more."

Soon after, the group made down payments on three more Big Bear area properties ranging from $75,000 to $94,500, which they rent out year-round, except for one, which they hold for personal use during the summer. Kristine and Glenn even decided to branch out on their own and buy a fifth property for $89,000 with Kristine's mother and two sisters.

"We are very optimistic about Big Bear," Kristine said. "We think it's a gold mine."

Much of the Southern California vacation home market, according to analysts, is being driven by baby boomers who are not only looking for an investment but also hope to reconnect, or "cocoon," with family.

Among those planning for retirement, many from Northern California and the Pacific Northwest are looking at desert properties. But more Southern Californians are choosing the mountains for second homes.

"People are just not willing to fly after 9/11," said Mike Dolan, owner of Prudential Properties of Big Bear and a real estate agent for 23 years. Instead, he said, Big Bear buyers are looking for quick and safe weekend getaways.

"This is a quality-of-life issue," he said. "Instead of talking about a stock portfolio at a cocktail party, [they] can enjoy their investment instead."

One such buyer is 64-year-old Patrick Morris, a Superior Court judge from San Bernardino.

Morris and his wife, Sally, 62, recently closed on a $194,000, 1,800-square-foot, three-bedroom, two-bath house in Running Springs, about 15 miles from Big Bear and minutes from Lake Arrowhead. The Morrises, who have owned other vacation property in the Mojave Desert, had been looking for another property closer to home to enjoy with their children and grandchildren.

"The stock market is bad," said the Morris' daughter, Katie Willis, 36, "but this is both an emotional and financial investment for my dad."

Already, family members have nicknamed their new vacation home "The Treehouse" because of its lofty location in the pines and 180-degree view.

"I hope this piece of property will stay in our family for many years to come, long past my and my wife's time," Morris said. "It will be a special unifying location for our family."

Other recent buyers are just beginning their own family traditions with vacation homes.

Poor stock performance, low interest rates and the birth of a baby helped 30-year-old Bob Anderson of Cypress decide the timing was right to buy a $182,000 second home in Big Bear.

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