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The new baby boomer must-have: A second-home getaway
by
Lisa Antonelli Bacon
for Virginia Business
April
2005
They come to relax; seeking sanctuary
from gridlocked traffic and overbooked schedules. Others
are looking to the future, for a place to retire. Whatever
the reason, second-home sales have taken off, fueled
largely by baby boomers in search of a little peace
and a good investment.
In 2004, second-home sales represented
more than a third of all residential sales transactions.
And developers and real estate agents say this is just
the ramp-up stage. For the next eight years, 10,000
baby boomers a day will turn 50, pushing them that much
closer to retirement and more leisure time. “For
the next 10 years, we expect an influx of baby boomers
into the second-home market,” says Joe Kincaid,
a broker for Wintergreen Real Estate Co.
The gold rush already has begun in Virginia, particularly
in mountain and beach resorts. Last year, more than
100 new homes were built in Wintergreen’s mountain
community in Nelson County, compared to the usual 40.
And homes for sale there were scooped up quickly, with
demand sparking significant increases in median sales
prices over 2003. According to Wintergreen Real Estate,
prices rose 29.3 percent for condominiums, 21.3 percent
for houses, and 18.3 percent for lots. “If there
was one problem that we had for 2004, it was lack of
available properties,” Kincaid says.
In neighboring Albemarle County — home to country
estates and horse farms — demand was up as well.
“There are very few properties available,”
says Steve Crandall, owner of Tectonics II Ltd., which
has been building medium- to high-end homes at Wintergreen
and in Central Virginia for more than 20 years.
The venerable Homestead Resort in Hot Springs is banking
on the boom. A second-home development called Homestead
Preserve plans 450 homes on 2,300 acres priced from
$250,000 to $1 million. Lot sales began in Feburary.
A moody stock market and historically low interest rates
make real estate an attractive place to park money.
A recent survey by the National Association of Realtors
found that 36 percent of the 7.7 million homes sold
in the country last year were second homes, with sales
up 16.3 percent over 2003. One in four of the homes
were purchased for investment purposes, typically by
a 47-year-old with an annual salary of $87,500. Thirteen
percent were bought as vacation homes, usually by a
55-year-old earning $$71,000 a year. The median price
for a vacation home was $190,000 compared with $148,000
for an investment property.
In some markets, a huge appreciation in the value of
primary homes provides the funds for people to purchase
second homes. For instance, in Northern Virginia, some
homeowners are opting to buy vacation homes with equity
taken out of primary homes. “There are buyers
here whose homes are now worth two to three times what
they paid for them. If they were going to trade up,
they would have to pay $1 million just to get the same
house, so they’re taking their equity and using
it as a down payment for a second home,” says
mortgage banker Ken O’Shea of Vienna. “Then
they can get away for the weekend with their families.
It’s a bonus all the way around if you can afford
the mortgage payment.”
Several years ago, O’Shea, 38, purchased a lot
on the Outer Banks of North Carolina. He bought another
lot at Wintergreen, a two and a half-hour drive from
his home. Because of its proximity and his family’s
love of outdoor sports, O’Shea decided to build
in the mountains, completing a two-story, 3,800-square-foot
home in November. With the land cleared to expose beautiful
mountain views, the lot alone — which he bought
for $42,000 — is now worth $250,000, O’Shea
says. By taking the plunge, O’Shea has joined
many of his clients, who are buying homes in the mountains
or at the beach as far south as Bald Island and Wilmington,
N.C.
A similar desire for family fun and a good investment
persuaded the Diemers of Goochland County to buy a second
home. Pam Diemer, 39, a residential real estate agent
and husband Matt, 38, a manufacturer’s rep, recently
bought a five-bedroom, 4½ bath, 3,000-square-foot
house under construction at Wintergreen. “We bought
a home that will be attractive for [people] looking
to rent a vacation home for a week, a month or even
a season,” Pam Diemer says.
When the house isn’t rented, it’s close
enough for her family to enjoy. “We live less
than two hours from Wintergreen, so we can go for the
weekend with our family when the house is available,”
she says. Recent prices at Wintergreen have ranged from
$179,500 for a two-bedroom condominium to $359,000 for
a three-bedroom home to seven figures and more for larger
homes.
For people who prefer the beach, the Eastern Shore is
still remote and rural enough to carve out a peaceful
retreat. The second-home market there is growing exponentially
with the development of Bay Creek Golf and Marina Resort,
a 2,000-acre development that includes two golf courses,
a marina, some boutiques and a restaurant. Plans for
a yacht club also are in the works.
Situated near the town of Cape Charles, Bay Creek is
a small town of sorts. “Developers around the
country have recognized the desire for quaint little
villages where you can walk to a store or a restaurant,”
says Oral Lambert, director of resort development. At
Bay Creek, home prices start at $300,000.
Certain elements of design and construction are important
to today’s second-home buyers. “The formula
that a lot of people are using is a house where all
the living is on one level,” Crandall says. Also,
a second home tends to be more relaxed than a primary
residence. “Living rooms and dining rooms are
out,” he says. Instead, people opt for the great-room
concept, with an eating area that opens into a large
common area.
While value-conscious, today’s buyers aren’t
sparing any expense for quality. “They don’t
want a house that is a maintenance nightmare three years
down the road,” says Crandall. Materials have
to be durable as well as attractive. Granite countertops,
stone fireplaces, hardwood floors and lots of windows
are popular in newer designs. Equally as important are
home theaters, or audio-visual rooms in which TVs come
out of the floor or the ceiling, and speakers are unobtrusive.
Internet access is a must, so some home buyers are incorporating
wireless capability into their house design. Of course,
more remote escapes aren’t always accommodating
to wireless technology, but DSL service or a dish are
available almost anywhere.
There are a few things buyers should keep in mind when
considering a vacation home: Mortgage lenders hold applications
for second-home mortgages to a higher standard than
mortgages for a primary residence because a second-home
mortgage is considered a bigger risk. So, buyers might
pay a quarter- to half-point more on their interest
rates.
Interest on a second home is deductible only if you
rent it out less than two weeks a year. Some insurance
companies require extra security on second homes inhabited
only part of the time. Plus, some resort developments
have covenants that limit how often owners can rent
their properties.
Apparently, such restrictions haven’t dampened
the appeal of second homes. Says builder Crandall: “I’ve
never seen anything like the past year in terms of building
second homes.”
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