The association’s latest Investment and Vacation Home Buyers survey noted the weighty decline of vacation home purchases to 721,000 (21.6%) from a 920,000 high in 2015 and the lowest since 2013 with 717,000.
NAR Chief Economist Lawrence Yun added that vacation sales last year dropped for the second consecutive year and fell by 36% from a peak of 1.13 million in 2014.
“In several markets in the South and West – the two most popular destinations for vacation buyers – home prices have soared in recent years because substantial buyer demand from strong job growth continues to outstrip the supply of homes for sale,” said Yun. “With fewer bargain-priced properties to choose from and a growing number of traditional buyers, finding a home for vacation purposes became more difficult and less affordable last year.”
Meanwhile, investment home sales rose by 4.5% to 1.14 million compared with 1.09 million in 2015; owner-occupied sales also increased by 12.5% to 4.21 versus 3.74 million in 2015 – the highest since 2006 with 4.82 million.
Vacation sales made up 12% of all transactions in 2016 – the lowest since 2012 with 11% – and declined compared with 16% in 2015. Investment sales stayed the same for the third year in a row at 19% and owner-occupied sales shot up to 70% compared with 65% in 2015.
“The volatility seen in the financial markets in late 2015 through the early part of last year also put a dent in sales as some affluent households with money in stocks likely refrained from buying or delayed plans until after the election,” Yun added.
The top two reasons of buying vacation homes were to use them for vacations or for family retreats (42%) and for retirement (18%), whereas investors bought mostly to generate income by renting out the property (42%) and for potential price appreciation (16%).
There is a show of rising interest in short-term rentals, as there was a slight increase in investment and vacation buyers renting out their properties for less than 30 days. Last year, 44% of investors and 29% of vacation buyers did or tried to rent their property and plan on doing the same this year, while 21% of investment buyers and 15% of vacation buyers did not rent last year but plan on doing so in 2017.
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Vacation homes remain vacated and unsold as sales plummeted by 21.6% last year, according to the National Association of Realtors (NAR).