Boomers spark second-home sales surge

Americans born between 1946 and 1964 — baby boomers — are 75 million people in their peak earning years with equity in their homes and low interest rates at their fingertips. In 2005, they accounted for four out of every 10 second-home purchases, a record high, according to a recent report by the National Association of Realtors (NAR).

Boomers are looking to second homes for leisure, retirement and investment, but they are looking for other attributes, too.

NAR credits the Taxpayer Relief Act of 1997 for increases in second-home sales. The tax law permits married taxpayers who file jointly to keep, tax-free, up to $500,000 in profits on the sale of their principal residence, provided they have lived there two of the previous five years.

The same benefits are attached to second homes, except you may sell only one home during a two-year period.

“Since 1997, real estate has outperformed virtually every other investment vehicle,” says Ron Peltier, president and chief executive of HomeServices of America Inc.

Second homes are sometimes places where long-distance families get together in a central location or places for physical activity — skiing, snowboarding, water skiing. The NAR reports that second-home buyers want amenities such as a swimming pool, nature trails, boating and golfing as well as nice restaurants, nice shops and things to entertain children.

NAR’s chief economist, David Lereah, reported on the association Web site (www.realtor.org) that the typical vacation-home buyer last year was 52 years old with a salary of $82,800. A typical second home was about 200 miles from the owner’s primary residence. The median price was $204,100, up 7.4 percent from 2004.

Markets with a huge appreciation value on primary homes are providing 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. Many homeowners who have seen their property values double and triple over the past five years are taking their equity and using it as a down payment for a second home.

Second homes provide a logical investment for boomers who have an eye on retirement but also want to keep their options open.

“In Ocean City, purchasers span different age groups, but they are mainly baby boomers. They might use [the Ocean City homes] a little in the off-season, but mostly they rent them out,” says Terri Moran, a Coldwell Banker Residential Brokerage Realtor in Ocean City who specializes in the condo market.

“Rental income helps buyers defray their monthly costs, including condo fees and taxes,” he says.

“I wanted to increase my investment portfolio,” says Michael Mason, owner of an Ocean City condo two blocks from the beach. “I’m only 53. Think what this will be worth when I’m 65.”

NAR reports that more than one-quarter of vacation homes will become primary residences after retirement and that nearly all second-home buyers consider their properties to be good investments.

“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. of Wintergreen, Va.

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