In this conversational Q&A on current and rising trends to watch in the housing market, NAR Chief Economist Lawrence Yun shares his thoughts on what's happening in vacation home sales, with rising inflation, and the high number of recent all-cash home sales in the latest data.
Lawrence, can you talk about what's happening with vacation home sales?
Lawrence Yun: An interesting development in vacation home sales is that buyers are showing greater interest in them. Eight percent of all transactions were classified as vacation home sales in the latest data. Usually, vacation home sales would comprise four or five percent, so a rise to eight percent is a meaningful increase.
Working from home for some people can also mean working from a vacation home. So clearly a preference for wanting to live in either a mountainous area close to the lake, or somewhere close to the ocean where people view that working from home can be a pleasant experience.
Another reason for an increase in vacation home could also be due to the fact that inflation is beginning to perk up. When higher inflation occurs, some people want to have a tangible asset as a hedge against inflation. So, it is also possible that buyers want a second property as a hedge against inflation.
Speaking of inflation, what is happening there and what should REALTORS® make note of?
Lawrence Yun: Inflation is rising better than four percent from one year ago. Gasoline prices are up 23 percent from one year ago and at a six-year high. Certainly, this is beginning to hit REALTORS®' pocketbooks because REALTORS® drive more frequently compared to the general population.
Also as related to moving, moving trucks along with appliance prices are rising much faster than broader consumer prices. So please advise your clients that it's not only about the cost of buying and selling homes - they should also be prepared to pay more for moving trucks, the prices of which are rising about seven percent from one year ago, as well as appliance costs rising close to 10 percent from one year ago.
All-cash sales were higher in the data this month. Why is that?
Lawrence Yun: Cash transactions are indeed picking up. Last year only 13 percent of transactions were cash. Now in the latest data they were at 25 percent, essentially doubling. It could be due to the fact that given heated multiple-offer situations, some buyers want to present more attractive offers. So from a seller's perspective, cash offers remove those mortgage contingencies and that has some buyers thinking they have an advantage by offering cash so we are seeing this rise in cash transactions.
Read more about the latest data on cash transactions.