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Daily Real Estate News  |  December 5, 2006  |   Second Homes: Strong Forecast for a Small Market
Contributing to the debate over housing as an investment for retirement is recent research by the Research Institute of Housing America of the Mortgage Bankers Association, which reveals that only a small percentage of older Americans own a second home.

Still, the report says, the sheer size of the baby boom generation means sustained growth in the second-home market with the number of homes forecast to grow by 2 million units in the next 10 years.

Of the 43 million American home owners aged 50 and over, only 15 percent also own a second home. Perceptions of a growing market are largely “anecdotal,” according to the study, which shows the rate of second-home ownership among 50- to 60-year olds relatively flat over the 12 years from 1992 to 2004.

Not only is the rate of second-home ownership among older Americans not increasing, but only a small number — 12 percent of second-home owners — plan to eventually sell their main residence and occupy their second home.

Additionally, according to the study, “second homes aren’t a main driver of investment decisions of older households,” with such properties accounting for only 13 percent of a typical second-home owners asset portfolio.

By comparison, the NATIONAL ASSOCIATION OF REALTORS® 2006 Profile of Second Home Owners shows that one-third purchased a second home with an eye toward diversifying investments, and 18 percent intended to use the home as a full-time residence after retirement.

Regional Market, High Turnover

Adding to the perception of growing demand is the regional aspect of this market as well as the rapid turnover of homes. Although nationally the percentage of second homes might be small, in many regional and local markets they account for a much higher percentage of sales. The South Atlantic region leads the country with the most second homes.

The typical second home might be held for 15 years, according to the Mortgage Banker’s study, but turnover is high with 45 percent of older second-home owners disposing of them in a six-year period. Changes in marital status and health drive the decision to sell, according to the study.

Other study conclusions:
  • Younger boomers are no more likely to own a second home than older boomers.
  • A majority of second-home owners either inherited their homes or purchased them with cash.
  • Second homes remain a small portion, only 4 percent, of overall mortgage originations.

By Camilla McLaughlin for REALTOR® Magazine Online

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