Boomers are pumping up prices — and rents — for vacation homes. Here’s where Lake Tahoe stacks up

There are opportunities to be had for people looking to invest in a vacation home – especially for those looking to rent the place out when they’re not using it.

But investors should move sooner rather than later, analysts say. Between the booming stock market and the nation’s shortage in housing inventory, demand for vacation homes is expected to increase. Locally, Lake Tahoe is commanding high rents for vacation properties, with an average weekly rate of $1,629 for a two-bedroom property in the summer, according to new research.

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*Ranked among Trip Advisor members as a popular destination for people living in: Sacramento, California; San Francisco; San Jose, California                                                                                    Pricing is based on the average weekly rate for a two bedroom rental in June, July and August.

A recent report by the National Association of Realtors found that vacation-home buyers as a share of all U.S. homebuyers declined for the third straight year in 2016, to 12 percent from 16 percent. The nation’s share of investment buyers remained unchanged at 19 percent for the third straight year.

But because many buyers of vacation homes eventually plan to use them as a primary residence, the market is heating up for those looking to bring in rental income while they work toward retirement. And average rents are frothy throughout most of the country’s most-popular vacation destinations.

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Data gathered by TripAdvisor (Nasdaq: TRIP) show that vacation homes in the Hamptons in New York and Martha’s Vineyard in Massachusetts continue to charge the highest summer rental rates in the country. Vacationers visiting the Hamptons, for example, could expect to pay an average of $3,633 per week for a two-bedroom rental home this year between now and the end of August.

Conversely, the TripAdvisor survey of popular destinations among residents of major U.S. cities found people vacationing in Scottsdale, Arizona, can expect one of the better rental rates, with a week at a two-bedroom rental home there going for an average of $1,067.

By comparison, the median 2-bedroom apartment rents for roughly $1,090 per month, according to research concern Apartment List Rentonomics.

Purchase prices for vacation homes have been increasing, NAR reports. The median vacation home purchase price was higher in 2016 ($200,000) than in 2015 ($192,000), according to the NAR’s 2017 Investment and Vacation Buyer’s Survey.

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And about one-third of all vacation homebuyers are paying cash for their secondary homes, the NAR report said.

NAR Chief Economist Lawrence Yun said demand for vacation homes is already on the rise and will only increase as more and more baby boomers retire.

Yun said the vacation home market has seen an uptick in buying activity in recent years thanks to older workers seeking a second home that can be rented until they retire. Add to that a strong stock market, and many baby boomers have a surplus of cash that is ready to be diversified into real estate.

Yun said vacation rental rates also are on the rise, as the nation’s housing shortage gives homeowners in vacation hotspots the ability to charge higher rates.

“Those who are looking to buy a vacation home will find that there are still deals to be had,” Yun said. “And the value of vacation home real estate is likely to appreciate in the future.”

Yun said that while the majority of baby boomers are still working, in the next five to 10 years a significant number will retire. That’s only going to increase demand for vacation homes, Yun said.

But the market for vacation homes is not strengthening uniformly. While Florida, Denver and Asheville, North Carolina, are seeing a collective surge in demand, Yun said other vacation favorites are not seeing the same level of price appreciation.

For example, the housing markets in parts of New York, Connecticut and Vermont remains relatively soft because those locations are not seeing the same degree of inventory shortages that other travel destinations are.

Article and images provided by: Sacramento Business Journal
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