The Second Home Muse

Why Vacation Homes Work

Being in the second home business, from time to time it's easy to focus on the business and numbers and lose track of the real reason the second home market exists. And that is, for people. This was brought home last night by a conversation with a good friend of mine. She and her husband bought a time share a few years ago, and ever since have been vacationing in the same spot on the Hawaiian island of  Kauai. They are planning another visit this August. She shared how great it was that her kids, now age 6 and 2, have their own familiar vacation place.  As Jennifer pointed out, they don't waste precious vacation time learning their way around a new area, finding the stores, finding the best beaches. The kids don't have to get acclimated to a strange setting. Instead, they all hop on the plane, and can play from the moment they arrive till the day they leave. They know exactly where they are going and what to expect, which is nothing short of a great vacation.

Isn't that why we get our second homes? Whether it is a timeshare, a condo or a beachfront home, the benefit is so tangible...easy, hassle-free vacations, year after year after year. No wonder this market is hot, and will be so for a long time to come. Thanks, Jennifer, for reminding me what it's all really about.

Investors Moving On

Time to get real, it seems. The bubbles at the top, like the Bay Area, are just too big for an investor to leverage anything. And the next line of places, like a Phoenix or Las Vegas are already over the top. So, according to an article in the San Francisco paper, the savvy second home investors are looking at towns that may not even be on your map, literally. Here's some spots that came up in the article. They all share the possibility of getting in low, generating good rentals, and then selling in 5 to 10 years for a profit:

- Clearwater, Florida,
- Charlotte and Fayettville, NC,
- Austin, Dallas, Arlington and Allen, Texas
- Oklahoma City (four bedroom, two bath for $165,000)
- Gary, Indiana (did you say Gary, Indiana??)
- Huntsville and Montgomery, Alabama

Well, this may not be for everyone, since we don't know 'which way the wind will blow', but if you're into real estate gambles, looking further afield may be your best bet.

Hawaii's Inside Track

An item caught my attention today about the second home market in Hawaii. We know how the baby boomers will keep the second home market afloat in general. But Hawaii has an added advantage: the Japanese boomers, or dankai, as they are called. It's no secret that Hawaii has tremendous appeal to our Asian friends. However, what makes it interesting for the second home market is that, first, the Japanese have much greater buying power these days, and second, they have pretty well-defined tastes. That means, not only do the dankai like "upscale" but they can also afford it.

Another interesting piece of info is that the Japanese buying second homes in Hawaii tend towards condos and even more, timeshares. Makes sense, as I imagine it would be easier to manage a timeshare when you live in another country, than deal with the complexities of full real estate ownership. Anyway you slice it, it's good news for the second home market in Hawaii. For more info, see the article in the Hawaiian newspaper, Star Bulletin.

And if you want to get in on the action yourself, check out Hawaii property here.

Coastal Home Insurance

What is that saying, it's an ill wind that blows no good? I'm certainly wondering about the winds from hurricanes, that have blown home insurance out of the water. Seems that the big insurance companies are making waves in many of the coastal states these days, and we haven't seen the end of it.  Here's some examples from a recent article:

In Massachusetts, which hasn't had a hurricane in more than 50 years, insurance companies are refusing policies on vacation home haven Cape Cod, Nantucket and Martha's Vineyard. Rhode Island faces increases or uninsurable homes. Even New York City is not exempt, as Allstate named NYC as being one of the 8 counties overexposed to weather losses. If this is happening in states that have been more or less 'risk-free', imagine Florida, and the rest of the Gulf Coast. Nationwide Insurance is pulling out of new Florida business, even after a 21% rate increase.

One of the reasons for all this is that the insurance companies are backed by reinsurers, unregulated  mega companies, who are raising the prices to insurers anywhere from 30 to 125%. Insurers are then passing on the costs to consumers.

So what's a vacation home owner to do? Good question. Anyone have any answers? We can't stop that wind from blowing...

Retirement Survey Skeptic

I'm all for finding out what the  consumer wants when it comes to retirement or second homes. But I must say my skepticism was aroused when I read a recent headline about the preferences of the over-50 market towards single family homes. The survey represented 1000 phone conversations. Of those planning to move soon, the survey touted "63 percent are looking to purchase a single-family home, while 18 percent would purchase a condo or townhouse and only a scant 2 percent" would go to an adult community.

But wait a second. First, it is 63% of the 21% who said they would move. 21% of 1000 is (according to my rusty math) 210; and 63% of that is 132 people. Surely we can't claim a nationwide trend based on the responses of 132 people who answered a phone call. Please... Surveys, yes, but how about significant numbers as well. Thanks.

Second Home Market Stats

Mortgage News Daily recently published some of the highlights of a recent NAR Second Home report. While it is too bad that it takes so long to get up to date statistics, I found these numbers particularly interesting from 2004:

- Second home sales in 2004 were 881,000, double the number from 2001
- Second home loans were 14.20% of all loans (this doesn't include seller financed, etc).
-  The median price of second homes was higher than that of primary homes: $172,000 versus $170,000.
- The median price of vacation homes was $190,000; median for investment was $148,000.
- Most second home growth was in recreational areas, starting with Nevada.

Most surprising to me was the growth of second homes in places like Washington, DC and Virginia. It makes sense, however, that DC folks hold onto their primary houses elsewhere. Most of them can't quite be sure their job is permanent. Or perhaps they consider the whole experience a vacation :)

Urban Second Homes

Here's today's second home quiz: What do these places have in common: the "W" hotel in Dallas; the Fountainbleu Hilton in Miami; the 200-year old Greenbriar in West Virginia, and the Plaza in NYC? (The last should be a give-away if you have been a regular reader of this blog...) Yes, you guessed it: they are all becoming 'condotels.' Besides being one of the ugliest words to be coined, the term represents one of the costliest forms of second home ownership these days.  Upscale hotels are reserving some of the rooms to be sold outright as condos, or, optionally, purchased as a fractional. A good portion of them are in urban areas, which makes them even more valuable.

According to an article in Investors.com, over 80% of these condo hotels are bought for second homes. Prices range anywhere from $400k to millions, depending on the hotel, and generally are bringing higher prices than just any-old condo. Why not... you get the best of both, the service and class of the hotel, and the benefits of home ownership. I'm afraid at this point anything else I might add would really just be sour grapes...if I had the dough, I'd do it too, even if I don't like the name 'condotel.'

Hedging Your Bets

There's no end to the ingenuity Americans have for making the best out of situations. Case in point-- no one seems to really know which way the housing market is going. So what do we do? Allow people to bet on it. That's a crude way of say, now, there's going to be a futures market for real estate.   This week, the Chicago Mercantile Exchange and Tradition Financial Services, together with Fiserv Case Shiller Weiss and Standard & Poor's, announced the launch of S&P CME Housing Futures and Options.

In addition to allowing institutions to work the numbers, the Housing Futures could also allow home owners to hedge their own investments, so that if their real estate value fell, they'd make up the difference by the way they bought in the futures market.  Or, as the CNN Money article suggests, people might tie the price of their house to the housing index.

As for me, I'd rather get on with the business of getting that second home by the beach, turning off the cell phone and computer, and just enjoying my life. Futures? What about the Now?

Good News for the Environment

Yesterday I mentioned the '100th monkey' theory. It is basically shorthand for saying that it takes time for things to catch on, and then when they do, they really do. The latest breakthrough the 100 barrier seems to be green building... building that is sensitive to the environment and sustainable. According to the National Association of Home Builders, green building is moving mainstream.  At their recent Green Building Conference in Albuquerque, N.M, they shared the results of a survey of their members. It showed a 20% increase in 2005 in the number of home builders focusing on green building issues, and expected growth by another 30% this year. At a time when the news from science about global warming gets more and more serious, it's great to see a bright spot on the horizon, at least in the building industry. Perhaps others will take a closer look at their industries as well.  For second home buyers, it means a greater possibility that you can actually find and buy houses that support the future. For earth's sake, let's make it happen.

New Destination on the Horizon

There's a saying that when the 100th monkey learns something, every other monkey then learns it too. Seems we are moving that way with a new vacation destination. Last week, a friend sent me the name of a vacation home developer in Nicaragua offering eco-friendly homes. Then last night, Coldwell Banker sent an article to EscapeHomes about their offerings in Nicaragua. And now news items are popping up about the growth of tourism in Central America.

Perhaps the 100th monkey has already learned what we are about to learn: great beaches, incredible prices, (loads of banana trees) and a huge welcome mat out for tourism, which is now the largest revenue source in these Central American countries. Time to bone up on your Spanish and take a look. ....88,89,90,91...