Maximizing Your Vacation Home's Value

Those who have recently bought vacation homes may feel like they have made a mistake, but the property is still an excellent investment. While the statistics indicate that vacation homes have lost some value, it is more complicated. Getting the most out of a vacation home starts with understanding how the real estate market is working and how you can maximize profits from it.

What Vacation Homes Are Worth

According to the National Association of Realtors annual Investment and Vacation Home Buyers survey, vacation home sales fell 30.6 percent between 2006 and 2007, while the median sale price of a vacation home is now $195,000, down by 2.5 percent from last year. Sales have dropped from a record 1.07 million in 2006 to 740,000, whereas the sales of investment properties that intended to be resold without the buyers living in them tumbled from 1.65 million to 1.35 million within a year.

Why Is There A Drop In Vacation Homes Value?

Last year, a huge number of real estate investors promptly left the market as mortgage lenders enforced tighter restrictions. NAR Chief Economist Lawrence Yun said, “Second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty. The other factor is the disruption in the mortgage market, with a significant tightening of credit during the second half of 2007.” The NAR survey says speculation buying dropped 18 percent and only three percent of those surveyed said that they planned on holding onto their properties for a year or less.

What this means is that even though the volume and final price of vacation home sales were incredibly high, the value has dipped slightly because of current market conditions. However, vacation homes sales were much higher in 2005 and 2006, which means that a decline in cost is a natural expectation when compared to the inflated prices a couple of years ago.

The Benefits Of Owning A Vacation Home

Even though many real estate investors left the market at the same time, it does not mean that a vacation home is a bad investment. It simply means that interested buyers need to look at purchasing property as a long-term deal and not as something that will produce a quick turnaround.

Now is the perfect time to buy if you are thinking about a vacation home. In fact, the NAR survey said 77 percent of people feel now is a good time to buy. You not only have more time and wiggle room to negotiate than when the market is hot, but the investment will definitely pay off once the market is on the rise again.

If you buy a vacation home, there is a huge hidden potential for profit. The NAR survey stated 25 percent of vacation home buyers said they plan to rent out their homes, and with good reason. Renting a vacation home means lessening the financial burden of owning a second home. It can also generate a steady source of income during an uncertain economy. If you have the savings to buy a vacation home, take advantage now of low prices and a guaranteed return in the future.