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More Boomers Buying Second Homes

April 06, 2006|From Reuters

Americans bought a record number of second homes for vacations and investment last year, amounting to nearly 40% of total home sales in 2005, a real estate trade association said Wednesday.

And with baby boomers at the peak of their earning potential, the push to snap up vacation homes is unlikely to reverse soon despite a broader housing slowdown, the National Assn. of Realtors said.

The group said vacation home sales rose 16.9% in 2005 to a record of 1.02 million units from 872,000 in 2004. Purchases of homes for investment, chiefly rental income, rose 15.7% to a record of 2.32 million units last year from 2 million in 2004.

The total of 3.34 million second-home purchases in 2005 was up 16% from 2.88 million in 2004.

Second-home purchases also made up a larger chunk of the total, rising to 39.9% of total residential real estate transactions from 36% the prior year.

"The baby boom generation is driving second-home sales," David Lereah, the Realtor group's chief economist, said in a statement.

"They're at the optimum point in life when people become interested in second homes. They're at the peak of their earnings, interest rates remain historically low and boomers want to diversify investments," he added.

The buyer profiles for the two types of homes were similar, the group said.

According to the report, the average buyer of an investment home in 2005 was 49 and earned $81,400 a year. For those seeking vacation retreats or housing for children in college, the typical age was 52 and income was $82,800.

Americans paid more for their second properties as well, driving the median price of a vacation home to $204,100 in 2005 from $190,000 in 2004, while the cost of a typical investment property climbed to $183,500 from $148,000 the prior year.

The Realtor group said 33% of 2005 vacation home purchases occurred in the Midwest, followed by 30% in the South, 20% in the West and 17% in the Northeast.

In the category of investment homes, 38% were bought in the South, 24% each in the Midwest and West, and 15% in the Northeast.

The report was based on more than 11,000 responses to surveys collecting data on market share, buying activity, demographics and home buyer preferences.

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